Economic and Finance Committee: Issues faced by South Australian Primary Producers in Retail Supply

Mr ODENWALDER (Little Para) (11:23): I move:

That the 94^th report of the committee, entitled 'Inquiry into issues faced by South Australian Primary Producers in retail supply', be noted.

In November last year, the Economic and Finance Committee, on a motion from the member for Light and supported unanimously—if my memory serves me correctly—by the committee, resolved to inquire into and report on options for enhancing and supporting South Australian primary producers in competitively supplying local retailers.

The purpose of this inquiry is to ensure the future of local processing and manufacturing in the agricultural, horticultural and viticultural sectors in this state. It is related to and grew out of, in a sense, and certainly is a complement to, our most recent inquiry into the labour hire industry. We heard significant evidence of abuse in the labour hire industry, a lot of it associated with primary producers. We made it clear in one of our recommendations that end beneficiaries of these industries should bear some of the responsibility for the labour hire practices of their source suppliers.

As noted by the Department of Primary Industries and Regions SA, South Australia's agriculture, food, wine and forestry industries account for $21 billion in exports annually. Given the significance of our state's reliance on primary industries and the vital role local primary producers play in South Australia's economic and social development, the committee has employed an unusual and unique two-limbed approach for this inquiry. This approach serves the purpose of examining the current issues affecting the state's primary producers and enables those affected to steer the committee towards specific areas of interest.

Therefore, in stage 1, the committee sought submissions from interested parties to focus on the issues which require investigation. This issues paper concludes phase 1 of the committee's inquiry process as it summarises the key issues faced by primary producers. The issues paper also contains further details about the inquiry, relevant background information, recent developments made to support primary producers and the effect these developments may have on our primary producing stakeholders.

As part of this initial phase, the committee received 13 written submissions from interested parties. These are now publicly available on the committee's website. These parties included the state's Small Business Commissioner, the ACCC, industry groups, a research institute and individuals. These submissions outlined many relevant issues affecting primary producers in this state, and the committee will first focus on the imbalance of power that exists between local primary producers and retailers in supply chains. This will involve an investigation on the occurrence and effect of unfair contractual dealings, including the existence of lock-in and exclusive contracts between producers and retailers, as well as an analysis of how primary producers can have a better negotiating position through initiatives such as cooperatives and mutuals.

Secondly, the committee will investigate the barriers preventing producers from entering larger supply chains. This will require an analysis of how producers may meet the expectations of larger retailers, including in the areas of availability, quality and pricing requirements. The committee also proposes to investigate how centralised markets may help this process. On this point, the committee also notes that the whole community benefits when consumers purchase local produce; therefore, the inquiry will also focus on whether these benefits are communicated effectively to the public. In doing so, the committee seeks to recognise the impact of programs and campaigns such as I Choose SA and Pick a Local, Pick SA.

The committee also proposes to seek ways in which transparency can be improved in the relevant supply chains. In doing so, the committee will explore how production costs may be reduced or passed along the supply chains and whether there should be minimum prices imposed for certain produce. The committee notes encouraging developments and current investigations aimed at giving a fairer go to producers at a federal level and proposes to review these recent changes to ensure the adequate protection of South Australian primary producers. In doing so, the committee will specifically focus on the potential shortcomings of the federal codes of conduct, namely the horticulture and grocery codes of conduct, to determine whether any action is required at a South Australian state level.

In transitioning to phase 2 of this inquiry, the committee now seeks additional comments and evidence from interested parties in response to the issues summarised in this issues paper. The committee will hold public hearings and invite interested stakeholders to provide oral evidence. As part of this second phase, the committee also plans to undertake some regional trips, including the Barossa Valley. This inquiry and its unique two-limbed approach gives a valuable opportunity for stakeholders to highlight their issues and concerns about the current structure and operation of our state's agricultural, horticultural and viticultural supply chains. It facilitates an important dialogue amongst interested stakeholders, aggrieved parties and the parliament through the committee.

On behalf of the members of the committee, I express my gratitude to those stakeholders who have provided submissions. I thank the member for Light, who has had a continuing interest in this area. I know he is a strong advocate for the local primary producers in his community. I thank our executive officer, Lisa Baxter, for all her hard work and our research officer for this project, Peta Spyrou, who has done an excellent job putting together the issues paper. With that, I commend the report to the house.

Mr TRELOAR (Flinders) (11:29): I rise to speak on the 94^th report of the Economic and Finance Committee and congratulate it on the work done so far. It does not sound like the task is finished yet. Listening to the member for Little Para, it seems that the inquiry will be ongoing, and in fact is transitioning to phase 2, including some regional trips which I congratulate the committee on. I guess the Barossa Valley is still regional, although it might be outer suburban these days.

An honourable member interjecting:

Mr TRELOAR: Believe me, I know about regional. I think the fact that the committee has been prepared to look into the future of local processing jobs, in particular, and how those workers are treated, first and foremost, as well as the opportunities they have within the agricultural sector is important.

As a former primary producer and one who still has an interest in the production of grains, wool and meat, it is probably fair to say that every so often we, as an industry, like to talk about value-adding opportunities within our sector. It is an issue that is very easy to talk about and it is one that makes us feel very warm and fuzzy inside, but in fact it is very difficult to achieve. I am not exactly sure why that is. It is probably easier to achieve in both horticulture and viticulture than it is in broad scale agriculture but, in the end, we are competing in a world market.

The member for Little Para quite rightly pointed out that if local purchasers are prepared to buy local produce then that contains the supply chain and keeps the costs down, but the reality is that the world of agriculture does not always work like that. In fact, commodities are traded worldwide. What primary producers have done is become far better at producing, and it is about how we manage that product from there on. I do believe that here in South Australia, if you can find opportunities and take opportunities to manufacture and process locally, and put product onto the world market in an improved form, an enhanced form, then our primary producers are better off and we also grow that processing sector.

My thanks go to the member for Light for providing the impetus for this report. I know that within his electorate he has many of those opportunities in front of him. I commend the report.

The Hon. A. PICCOLO (Light) (11:32): I would like to speak briefly to this report, which is, if you like, an issues paper and designed to end phase 1 of this process. However, it is a very important report because it outlines the initial response we have received from the industry in relation to issues that are of concern to its members. That is very important. It is very easy for us in this place to think we know what industries need and what we need to look into, but the parameters for this inquiry have been established by the people directly involved in that industry.

This report is the result of discussions I had with a number of people in my region. I had discussions with people in the viticulture industry who talked about their capacity to sell their product to larger retailers and, basically, their capacity to actually make a profit on their product from the retailers, when the retailers have enormous market power and literally set the prices in that industry. That was certainly true of the viticulturists, particularly for the smaller producers in the wine industry in my area.

It is also true for people in horticulture. I had a particular market gardener who came to see me and who spoke about the issues he had. I will be careful how I phrase this because one of the things that people in the industry are concerned about is that if they are seen to criticise a retailer there are not many options—if you upset one retailer you only have one left—so they are very hesitant about going public with their concerns.

This particular retailer grows a particular product, and this product has a particular time to be grown. So when contracts are being changed once the seed is in the ground, it means either the producer has to reduce their prices to sell the product off or just allow it to die off not make any profit at all. So, one of the issues is market power in the industry. It is an issue that has been addressed by a number of inquiries, but I do not think we have nailed it down.

We did to some extent in this parliament briefly address the issue of market power. We had a couple of inquiries by the same committee; one looked at franchising law and one looked at farm machinery. Both inquiries led to the Small Business Commissioner Bill—and I will not go into the history of that—which got through parliament and is operating very well.

Under that bill, which was taken through the parliament by the Hon. Tom Koutsantonis, there is a head power to create codes of practice. I think that head power is very powerful and very reasonable and one that may be used by a whole range of industries, not only in franchising but in farming. I know it has been used in the motor vehicle industry, etc., and that is something that we may explore. Certainly, the Small Business Commissioner in his initial submission to this inquiry made it very clear that it is an issue that we need to look at and how it may be used to address some of the market power in this industry.

The issue of unfair contracts has also been addressed, in part, by the commonwealth. I also understand the commonwealth is currently looking at legislation which has, if you like, in essence, a chain of responsibility when looking at franchising law. I support that federal government legislation. It is an excellent proposal, and I know that a number of small business industry organisations support it. I also note that the Franchise Council of Australia, in their usual form, oppose it. I have never known the Franchise Council of Australia to support any reform in that industry that takes power away from the major players or franchisors.

Mr Griffiths interjecting:

The Hon. A. PICCOLO: The member for Goyder looks at me and says nothing has changed in the sense that we actually—

Mr Griffiths: I didn't say that. I reflected upon the discussions—

The Hon. A. PICCOLO: Yes, which we had some years ago.

Mr Griffiths: Yes.

The Hon. A. PICCOLO: That's right, and the Franchise Council of Australia were quite opposed to those changes, too. It was the work we did in this place which also led to some moves in some other states, including Western Australia—and I cannot remember the member's electorate, but his surname is Abetz. I cannot remember his first name, but he was the brother of Senator Abetz who led the charge in Western Australia.

Mr Whetstone: Peter.

The Hon. A. PICCOLO: Peter. Unfortunately, he is not there anymore because he recently lost his seat. It was the action of the states that led to the federal government of the day—and subsequent governments, both Labor and Liberal—making that change. When it comes to franchising the reform, unfortunately both parties have been a bit reluctant to do the right thing at a national level, but what we did there led to changes.

This new round of changes proposed by the government is supported by small business. We support it, but it is opposed by the Franchise Council of Australia whose current spokesperson, I understand, is former Liberal business minister Billson. It is interesting that he was the minister when he introduced the last reforms and that now he is working for the FCA he opposes these reforms. But that is life, and that happens on both sides of politics—if I am correct in what I heard this morning on the radio from the banking association.

This is a very important inquiry. There is unfinished business from some previous inquiries, and I think the member for Goyder may have been involved in those as well. This is the inquiry we talked about that looked at the supply chain and whether we needed to look at the effectiveness of the supply chain from farm gate to ports.

Mr Griffiths interjecting:

The Hon. A. PICCOLO: It must have been some other member.

Mr Griffiths interjecting:

The Hon. A. PICCOLO: Okay. That was the inquiry that looked at whether the Essential Services Commission of SA should look into better understanding the supply chain. I certainly think that is worth looking at. Unfortunately, the industry has a number of areas where there are very few players, which means that a lot of the market power is held by a small number of people who influence this industry disproportionately. In the end, the people who seem to get the least money out of the industry are the people who grow the stuff, the producers themselves, so we need to look at that.

As I mentioned, there have been a number of changes to the federal codes of conduct recently, and we need to see whether they are working as effectively as they say. I would like to stress that it is very important that in the next phase of this inquiry we get as much feedback on the issues paper itself from people involved in the industry at any level and that we encourage people also to speak to the committee.

In the end, the committee is a bit like a court: it is only as good as the report, or the decision is only as good as the evidence before it. So, I would strongly urge people to make submissions on the issues paper, but also, if the opportunity arises, to make submissions orally to us. I would like to thank all those people so far who have made submissions and the people involved, and I strongly recommend the report to the house.

Mr ODENWALDER (Little Para) (11:40): In closing, I want to again thank the member for Light for bringing this to the committee, and for pushing along so hard with it, and I also thank all the other members of the committee for their continuing support for this project. Again, I want to thank the staff for an excellent issues paper. It is an interesting approach we have taken this time, and I think it is a really good approach because it allows the people affected by this issue to direct the inquiry so that we get a really good result for them. I want to thank everybody who has made a contribution, including the member for Flinders, and I commend the report to the house.

Motion carried.