A discussion on what can be termed a “A market failure in the Western Australian Dairy Industry” can be found here.
A long time ago in the year 2000, the dairy industry in Australia deregulated.
This affected the seven previously separate regional industries – Tasmania, Victoria, NSW, Southern Queensland, Far North Queensland, South Australia and Western Australia – in a number of ways.
Using Western Australia as an example, the following products were manufactured and facilities operated, at the time of deregulation:
- drinking milk in 3 well maintained factories
- ice-cream – world class factory producing domestically and exporting to Japan
- 2 cheese factories, both old, one with whey drying facilities
- 3 old milk powder driers
- 1 butter maker
In Western Australia in 2017:
- drinking milk in 3 factories, one of which is for sale
Cheese, butter, ice-cream and milk powder all have left the state. Note – one cheese factory – which does not have whey drying capacity could be restarted.
Consequently, all the cheese consumed by Western Australia’s 2,600,000 people is brought from out of state. The numbers are large.
- 35,000 tonnes of cheese
- 10,000 tonnes of butter
- 46 million litres of ice-cream
These changes took place due to rational decisions by the processors, but to the detriment of the local industry and populace.
Investopedia defines market failure as –
“Each individual makes a decision that is correct for themselves, but this decision proves incorrect for the group”
Read more: Market Failure Definition | Investopedia