When the Australian government signed the China Free Trade Agreement it created the situation you describe. The under capacity in the dairy industry to meet increased demand from both locals and for exports is another factor. We also need to consider the reasons that some women choose an infant formula milk substitute rather than breastfeeding their child. There may be some medical reasons too in some cases.

The health benefits of breastfeeding have been well documented – babies get fewer colds and infections and are less likely to develop asthma or become obese. In America, the Center for Disease Control has demonstrated through their research that there is a link between the rates of breastfeeding in states across the US and median income levels. “In almost all cases, the lower the income, the lower the breastfeeding rate”.

Moving on to China, it could be that there is a causal link between income levels and working conditions. After the toxic-milk scandal of 2008, we might also wonder about the increased demand for infant formula but we do know that the demand is for products sourced from outside China. However, accepting all of these things as a given, research by Unicef shows that attitudes and practices in China need to change.

“The issue is steeped in controversy, and the argument against the practice [of breastfeeding] wrapped in layers of traditional beliefs and misconceptions. Add some very aggressive marketing of infant formula – China has emerged as one of the leading players in this market – and the lack of public facilities to accommodate breastfeeding mothers, and you have a country with a very small proportion of mothers who understand the advantages of breastfeeding. Despite broad consensus on the health benefits of breastfeeding among health authorities in China, the exclusive breastfeeding rate for children under 6 months old in China is only around 28 per cent.”

http://www.unicef.org/infobycountry/china_70055.html

I read the news about what had happened in Australia in British newspapers. To try to get a broader picture I also read how the situation was being described in Australian media sources. The editorial in the Sydney Morning Herald is interesting as it links a number of things, including Single’s Day (?) in China and the recent changes to the One-Child Policy.

“But with China lifting its one-child policy, suppliers chasing the lucrative Asian market, and a significant lag time before new suppliers come online and herds can be increased, shortages are likely to persist even without the extra oxygen of a buying spree like Singles Day.”

The way this editorial is written indicates that Australian producers are being driven by the Asian market as it states in the article. “…the problem lies with suppliers redirecting supplies to China, not with retailers.” Scarcity also creates profiteers and some retail stores have reacted rather slowly to bulk purchase.

“Surely parents dependent on formula to feed their babies deserve better than this uncertain and piecemeal approach. Other governments, namely New Zealand and Hong Kong, have found a solution to the impact of ballooning Chinese demand on locals. Our government needs to do the same.”

http://www.smh.com.au/comment/smh-editorial/australian-parents-deserve-reliable-supplies-of-infant-formula-20151113-gkyi55.html