The price of fresh milk is set to drop when a milk tax is lifted on 22 February 2009.

The Rudd Government announced last year it would abolish the 11 cents a litre levy, which was established by the Howard Government in 2000 to fund an industry deregulation adjustment package.

The levy funded a number of measures to help dairy farmers adjust to the removal of state and Commonwealth government price support measures. It is collected by dairy processing companies and appropriated into a trust fund, which is administered according to statutory obligations and a statutory funding agreement between Dairy Australia Ltd and the Commonwealth.

According to statutory requirements, it was to be abolished once the trust fund was brought into balance.Minister for Agriculture, Fisheries and Forestry Tony Burke wrote to major retailers and retail associations in January reminding them that the Government expected costs savings from the removal of the tax to be passed on to consumers. He has since welcomed announcements from major retailers that they would pass the tax cut on to consumers.

German discount grocer Aldi last week announced an immediate reduction of 11 cents per litre in the price of milk, while Coles and Woolworths have both guaranteed all fresh milk will be cheaper by 11 cents per litre from Monday 23 February, and are already reducing the price of their private label milk.

“This is a responsible decision by major retailers which will save families money at the checkout, at a time when every cent counts,” Mr Burke said. “We expect other retailers to pass on the modest savings to consumers.”

“Any complaint or suggestion of anti-competitive conduct over the removal of the levy will be dealt with by the Australian Competition and Consumer Commission,” he warned.

Mr Burke added that the Federal Government is aware of the difficulties faced by the diary industry as the farm-gate price falls.

“We will continue to look at what potential forms of assistance may be available for dairy farmers,” he advised.

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