Australian dairy product manufacturers face some cost disadvantages relative to their competitors, but also some relative advantages (including lower raw milk costs), argues this report.

Overview

The Commission’s preliminary assessment is that Australian dairy product manufacturers face some cost disadvantages relative to their competitors, but also some relative advantages (including lower raw milk costs). Some cost disadvantages arise from inefficient policies where corrective action by governments could be warranted, but others simply reflect market conditions where policy interventions are not warranted. A major constraint on dairy product manufacturing appears to be raw milk supply, but the commerciality of increasing milk production is primarily a matter for manufacturers and dairy farmers.

The Commission’s task

The Australian Government has asked the Productivity Commission to undertake a study into the costs of doing business in the dairy product manufacturing industry. The Commission has been asked to:

• undertake a case study of the cost structures of businesses operating in the Australian dairy product manufacturing industry
• where relevant, identify areas of cost advantage and disadvantage for these businesses compared to international competitors.

In the same terms of reference, the Commission has also been asked to undertake a study into the costs of doing business in the retail trade industry. A separate interim report has been prepared for that study.

The Commission is seeking written feedback on the interim reports by 11 July. Final reports will be provided to the Australian Government in early October 2014. Find out more about making a submission here.