Market failure in the Western Australian Dairy Industry

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