The Press SATURDAY, AUGUST 9, 1975. The $50m subsidy and the price of milk

Press, Volume CXV, Issue 33917, 9 August 1975, Page 14

The Press SATURDAY, AUGUST 9, 1975. The $50m subsidy and the price of milk

New Zealand consumers pay less for their milk than consumers in any other developed country. This is mainly because the Government pays the greater part of the price of the milk. Last year the taxpayer put up Soo million to keep the price of milk at 4 cents a pint The Minister of Agriculture and Fisheries (Mr Moyle) hinted recently that the Government would consider removing or reducing this subsidy. Mr Moyle first raised this possibility more than a year and a half ago Other members of the Government have been less than enthusiastic about removing the last major subsidy on an item of food, but the mounting size of the subsidy must be causing them to have second thoughts. The New Zealand dairy industry is highly efficient. If New Zealand consumers paid a price which covered the costs of production and distribution. milk would still be a bargain in New Zealand by comparison with most other countries But an increase of more than 100 per cent in the price of milk would be a shock to most consumers. Food prices have been rising at a rate of 11 per cent a year and the cheap bottle of milk is one of the few bright spots on the family food bill. The increase that would be caused in the Consumer Price Index by doubling the price of milk would be less than 0.5 per cent, but the food bills for many families with several children would rise one to two dollars a week —enough to make the Government hesitate. The arguments against removing the subsidy are cogent, but not sufficiently compelling to justify continuing so large a subsidy. Once again the delay in taking a decision has made any change a hard one to bear Furthermore, milk is such a beneficial food that discouraging its consumption would be bad policy For ail that, milk at 10 cents a pint would still be a bargain when compared with almost any drink except water.

Any predictable decline in the consumption of milk for economic reasons could be fairly met by adjusting the appropriate welfare benefits. These increases in benefits would cost the taxpayer much less than the continuing subsidy on milk. The increase would not need to be so great if consumers were willing to use reconstituted milk during the winter months, when the costs of producing milk are highest. Mr Moyle hinted that the Government also had this under consideration Public prejudice against anything but fresh milk is strong, although ill-founded, and an intensive campaign would be needed to persuade consumers to accept reconstituted mtlk in the interests of economy The suppliers of town milk would have to be persuaded that the changes would not be to their disadvantage. Although the economies possible in the farming industry certainly deserve serious attention, the fact remains that a large part of the cost of milk at the consumer s gate, or in the local dairv. is attributable to collection, processing, bottling, and delivery Changes in these departments of the industry may be needed too.