69 – Local government and milk. What do they have in common?

Posted by Colin Weatherby                                                                         660 words

cow

I recently drove past a car sign-written with advertising for milk available direct from the farm. It promoted the virtues of buying milk from the producer. I had earlier heard a radio advertisement for milk available from an inner urban Melbourne dairy where I am sure there are no cows. The advertisement talked about local milk from local people.

There may be some difference in the milk each company is selling. And it is probably different from the milk I can buy at my supermarket. So what is happening with milk and why might it tell us something that is relevant to local government?

Milk is a commodity product. Mostly, large companies buy milk from large and small farmers and treat it to make the milk that we buy and consume on our breakfast or in our tea. Most families use large amounts and they expect it to be readily available and inexpensive. In Melbourne there have recently been price wars between major supermarket chains selling cheap milk. In this context, how can farmers selling directly to consumers or local inner city dairies expect consumers to pay more for their milk?

I am not a marketer but I will have a go. They are differentiating their product and providing different value propositions for milk consumers. People, who care about farmers and the economics of agriculture, or who believe producers care more and sell better products, may prefer milk straight from the farmer and will pay extra to get it. If you want to be part of your local community and its economy, or you believe that local food production is better for the planet, you may buy from the local dairy. In each case, value is being attached to milk and people are prepared to pay more to have it.

In local government, councils are still busy trying to provide basic services for the lowest taxes – i.e. basic milk at the lowest price. The proposed rate capping to be implemented by the state government reinforces this view and councils are already talking about improving efficiency, sharing services and doing anything they can think of to cut costs. The focus is completely on ‘getting milk onto the shelves at the lowest price’. There is an alternative.

Councils provide great value. In some cases outstanding value. For example, the bulk purchasing of household waste collection services has achieved a cost of around $1 per collection. Think about it. A truck comes to your house and takes away up to 120 litres of your rubbish for $1. Try and buy that service for yourself. Mowing services for parks is another example. The cost is around $0.01 per square metre per cut. These are easy examples but you seldom hear councils talking about them.

Anyone who has raised a family will know the amount of time you spend using maternal and child health centres, pre-schools, playgrounds, parks, libraries and sports facilities. The cost (paid through taxes) is much less than alternative ways to spend family leisure time. People with aged parents to care for will have similar stories. Many of the services would be less affordable if they had to be purchased individually and privately.

Despite some of the limitations in choice that these services have, the value is undeniable. More choice should and could be available through better design of services. Quality and cost-efficiency could also improve for many services. But they are great value services as they stand. So, why aren’t councils supporting their price (i.e. taxes) and demonstrating the value?

The main reason I can see is lack of confidence in themselves – councils keep a low profile and focus on reducing costs instead of creating value because they worry that they won’t deliver.

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