AUSTRALIAN dairy farmers will milk the rewards of China's decision to slash tariffs on infant formula.
The tariff cut - from 20 per cent to 5 per cent - could hand local farmers a greater share of China's burgeoning infant milk powder market, according to Australian Dairy Farmers chairman Noel Campbell.
Mr Campbell said the announcement would also help reduce the impact in the dairy sector of New Zealand's free trade agreement with China, signed in 2008.
"Australian dairy farmers are currently at a disadvantage with respect to dairy products into China as compared to New Zealand," he said.
"There's a 10 per cent difference in tariffs, which means we're behind the eight ball right from the start.
"Now, with the new change, we're obviously able to sell into a marketplace that's a more level playing field."
Australia is the third-largest supplier of infant milk powder to China with about 15 per cent of market share, and sales worth $16.56 million in the past financial year.
Only New Zealand (18 per cent) and Singapore (37 per cent) hold greater market share.
In total milk powder exports to China, Australia is the second-largest behind New Zealand.
Experts say China's birth rate, and a growing preference for powdered milk, could see the country's infant milk powder market, currently worth $12.4 billion, swell to $25 billion by 2017.
Mr Campbell said the Australian dairy industry was keen to capitalise on the demand.
"China is a growing market, so every year that (demand) is going to increase and therefore we would like a greater market share," he said. "This (tariff cut) enables us to do so."
The infant formula tariff cut is one of more than 540 announced by the Chinese government for this year, as it moves to liberalise its trade ties with the rest of the world.
Mr Campbell said international suppliers were still seeing increased demand for infant milk powder after China's 2008 melamine milk scandal, which killed six babies and infected 300,000.
"I think the local market is still reluctant to buy local product," he said. "They don't trust the local product in a lot of respects, so therefore there is an advantage to important products from reliable sources, and that's obviously ourselves, New Zealand, Europe."