Market Failure in the Western Australian Dairy Industry

A discussion on what can be termed  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 7 previously separated industries  in a number of ways - Tasmania, Victoria, New South Wales, Southern Queensland, Far North Queensland, South Australia and Western Australia. - in a number of ways 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 2017, the 3 drinking milk factories remain, one of which is for sale,

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 in 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 have taken 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

Click to Download Report