19/11/2015 7:15 AM AEDT | Updated 15/07/2016 12:51 PM AEST

Liberal MP Argues Against Gov't Intervention In Baby Formula Supply Crisis


CANBERRA – Liberal backbencher Craig Kelly has argued the Turnbull Government has no role to play in fixing Australia’s baby formula supply crisis, which has led to the stripping of store shelves and desperate parents driving and calling around for hours for a single tin.

It comes as the Minister assisting the Minister for Trade Richard Colbeck started talks with big retailers, including Coles and Woolworths, in a bid to find short term solutions to the shortage.

Writing on Facebook, the federal member for the Sydney seat of Hughes insisted government should get out of the way and let entrepreneurs solve the problem.

Liberal MP, Craig Kelly, centre

“We should have the courage to do nothing,” Kelly wrote.

“For any short-term 'fixes' are likely to cause more harm than good.”

He wrote the unintended consequences of government intervention would "contribute to shortages, and harm the very people whom such regulations are intended to help".

Due to an insatiable demand from Chinese buyers and profiteers for Australia’s quality product, supermarkets and pharmacies have been forced to heavily ration supplies, however shelves have still been wiped out.

The problem all began back in 2008 when a tainted baby formula scandal in booming China caused a number of deaths and led to hundreds of thousands of others to fall ill.

But the problem is peaking now, with Kelly saying infant milk formula producers have underestimated demand and have not been able to ramp up production quickly enough.

“For example, the New Zealand-listed a2 Milk Company is reporting that sales of their a2 Platinum infant formula is currently five times that in the same period a year ago, and they just can't keep up with demand,” he wrote on Facebook.

Hong Kong and New Zealand have imposed export limits on formula, while China has import limits on the popular product.

But Kelly insists any move to regulate formula supply in Australia should be resisted.

“Such calls are on the mistaken assumption that Government will somehow get it right, and be able to match supply and demand better than the market and the private sector.”

“The economic history of the last 100 years evidences the folly of such thoughts."

For almost everywhere that government has attempted to regulate supply and demand, product shortages are the norm.

The trade minister has already ruled out stockpiling infant formula in Australia or imposing export limits on formula at the Australian border.

It is likely that any solution to the baby formula supply crisis will be an industry-led solution with guidance from Government.

The member for Hughes has declared less government regulation is the only way out of the problem.

“The only solution to the current shortage is to allow the carrot of incentives to take effect, so that investment in the setting up new production facilities to increase supply takes effect as soon as possible,” Kelly wrote.

“(Sometimes) the best solution is for a Government to do nothing, to get out of the way and let entrepreneurs solve the problem.

“But that does take courage.”