Business council backs Murray Goulburn's call for dominant dairy co-operative

MURRAY Goulburn’s call for a massive co-operative in the Australian dairy industry has received the backing of the Business Council of Australia (BAC).

The BAC this week urged the Abbott government to abandon its hands-off approach to the economy and drive growth in industries such as agriculture, which have competitive advantages.

Drawing on a report prepared by global management consultant McKinsey and Company, the BAC said delivering growth in the next decade would be much harder than in the previous two decades.

“It requires businesses and governments to take a different approach, to take more deliberate and purposeful steps to deal with a changing world,” the council said.

“The only way to guarantee success in this world is to be competitive at a world standard.”

The report calls for the government to take a leading role in identifying where Australia can competitively tap into global demand, set direction and take action in partnership with industry.

It singled out the dairy industry as “a story of squandered potential” due to lack of government direction.

The report estimates that today’s dairy exports of about $2 billion could be increased to $8 billion by 2025 if Australia was to replicate the success of New Zealand, where the Fonterra co-operative has a near monopoly on milk processing.

The New Zealand government passed an act to allow the nation’s two largest co-operatives to merge to form the competitive giant Fonterra.

“The act was passed to increase international competitiveness, but also included safeguards to prevent abuse of monopoly power in the domestic market,” the report says.

The report echoes the sentiments of Murray Goulburn managing director Gary Helou, who repeatedly called for his co-operative to emulate Fonterra during his failed takeover bid for Warrnambool Cheese and Butter.

“The Warrnambool miss was a miss for the industry, not for MG. We are fragmented, subscale, inwardly looking and lacking the capacity to compete internationally,” Mr Helou said after losing the battle to Canadian-owned Saputo.

“At the start of the 2000s, Australia’s milk industry was on par with New Zealand’s,” Mr Helou said.

“A decade later, New Zealand had doubled production while Australia’s stayed flat. New Zealand became the world’s leading exporter of milk and added $7.5 billion annual export growth.”

Murray Goulburn is Australia’s biggest dairy company and processes about one-third of national milk production.

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