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Feb 26, 2014

Abbott's drought relief: back to the age of entitlement for farmers

The government's assistance package for farmers today ignores the consistent advice of independent reviews of drought relief that say we should encourage self-reliance, not give handouts.


Well, it’s heartening to discover yet again that the age of entitlement isn’t over if you have the right connections. This morning the government announced a $320 million “drought relief” package for farmers. In doing so, it has turned its back on five years’ worth of drought relief reform at the Commonwealth-state level.

In 2009, the Productivity Commission produced a report on drought assistance that was scathing of the National Drought Policy and the “exceptional circumstances” trigger that Labor had inherited from previous governments. Exceptional circumstances payments, it said, did “not help farmers improve their self-reliance, preparedness and climate change management …Governments need to commit to a long term reform path that recognises that the primary responsibility for managing risks, including from climate variability and change, rests with farmers”. The report said:

“From its inception, policy has ostensibly centred on helping farmers build their self-reliance to manage climate variability and preparedness for droughts. Program expenditures, however, have not been directed to this end but have mainly flowed as emergency payments to a minority of farmers in hardship and to stressed farm businesses.”

Saliently, the commission noted that previous similar recommendations from similar reviews had been ignored.

Many farmers and farming organisations actually objected to the policy at the time. As one submitted to the commission, “[e]fficient farmers who save and invest off farm are penalised, whilst farmers who waste money [and] spend everything get more help”. The commission recommended terminating exceptional circumstances handout programs and replacing them with programs to assist farmers to better manage financially, prepare their operations for drought and provide only limited hardship assistance.

Unlike previous reviews, the PC review kicked off a proper reform program at the Commonwealth and state level, with the Exceptional circumstances process dumped and new programs aimed at preparedness and risk management trialed in Western Australia. The trial was deemed a success, and all states and territories signed on to a reformed drought policy in 2o13, for commencement on July 1 this year. Financial assistance did form part of the new package: a farm household allowance, on the same level as Newstart, would be established. This allowance has been in effect brought forward, with easier eligibility criteria, today.

However, the bulk of today’s package — $280 million — is via cheap debt: “drought concessional loans” will be made available “for debt restructuring, operating expenses and drought recovery activities”. There’s little detail about the loans, but they appear to be a big expansion of the existing Farm Finance Concessional Loans Scheme, under which farmers can get cheap loans with an interest rate that goes up when circumstances improve. The Productivity Commission criticised exactly this form of cheap debt in its review:

“The Commission does not support offering concessional finance to a group of borrowers to induce them to borrow at a higher level than their own risk preferences would allow. A greater sensitivity to a loss of the farm due to the high non-monetary value placed on farming is rational and does not provide an efficiency case for measures to encourage farmers to take on more debt.”

In short, if farmers can’t access borrowings from the market at existing commercial rates, giving them access to below-commercial rate loans merely encourages risky behaviour.

The long-term resistance to the findings of numerous reviews of drought assistance is based in the National Party’s obsession with keeping agriculture frozen in time, in a mid-20th century bubble when farming was primarily a family industry, as opposed to the far smaller, hugely productive and internationally successful industry it has now become, employing far fewer people but exporting far more and being much better integrated into agribusiness supply chains. Agriculture isn’t SPC Ardmona, or the car industry, or Qantas — it’s a trade-exposed sector that has been a huge success story for Australia over the last 20 years in terms of trade and productivity. That’s all the more reason why it needs no handouts, despite a drought — indeed, during the last drought, Australia significantly lifted its overall level of agricultural exports.

This isn’t about helping farmers, this is about helping the National Party and preserving the Nationals’ outdated obsession with an industry that ceased to exist decades ago.


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13 thoughts on “Abbott’s drought relief: back to the age of entitlement for farmers

  1. Beohm Catherine

    Spot on Bernard.

  2. klewso

    The party isn’t over, if you have the Right connections.

  3. Coaltopia

    Assistance to cattle farmers is also a de facto methane subsidy, which adds to the black irony.

  4. JohnB

    Pork barrelling is difficult for any politician to resist.

    For National Party politicians it is impossible.

    Might have something to do with the anti-intellectual attitudes which are common in pockets of resisters to change.

    After all, this money doesn’t have to be paid back, does it? That only applies to Julia’s and Kev’s extravagances, real and imaginary.

  5. Ozymandias

    It seems to me that those on the land always seem surprised by drought, and that each drought is ‘the worst in living memory” and then the hand goes out to government. Those agraian socialists are obviously more worthy.

  6. Dion Giles

    From the rum rebellion to Eureka to the prewar Jap lobby to the Brisbane line to the gerrymanders to the shipping of cattle and sheep to torturers to the rape of the Murray Darling basin to the WA royalties for regions deal – the squatters have been calling the shots far, far too long. The proper role for farming is producing food for Australians to eat, not for international trade.

  7. ianjohnno

    In the early 1970s my maternal grandfather gave me his opinion of “cow cockies”.

    It was to the effect that during good times they would drive into town in their flashest car and expected to be treated like royalty; in lean times they would come in an “old bomb” and expect charity at every turn…and still expected to be treated like royalty.

    For most of my life I had a lot of sympathy for the-man-on-the-land, but I have finally come to agree with my grandfather: Bugger ’em!

  8. Iskandar

    Here’s hoping the Abbott caretaker government will be as short-lived as its “end of the age of entitlement”.

  9. MJPC

    ianjohno; Your grandfather was a wise man. As climate change bites I wonder who is going to be the first brave politician to state the bleedingly obvious; how many of these farmers are being bailed out to farm marginal and un-productive land?

  10. Brown Nathanael

    Climate change is news to the Coalition. Oh look, droughts are more frequent now… who knew?

  11. klewso

    The sort of intransigence for which Cousin Jethro and the rest of the “Climate Change Denialists Party” stands, is behind these extreme swings – it can only get worse if nothing is done and more expensive to do anything about eventually – and they don’t want to do anything about that. This is a huge ship to turn around and we’re running out of draft under their piloting.
    What a member?

  12. AR

    The facts(yeh,I know,irrelevant) on where ANY kind of agricultural activity, grazing or cropping,should take place in Oz have been known since federation. In SA it was the Goyder Line – ignored then and still, now -, in NSW the Western Division (cockies there do NOT own their land, they lease it from the Crown for cents per sqkm, as is the case throughout Centralia)and SW Qld. Utterly insane but apparently embedded in, if not the national psyche, certainly the National’s psychopathology.
    We can easily feed ourselves just farming on the eastern side of the GDR and STILL have plenty left over for, selective export.
    The bulk export of wheat & meat is nothing more than soil mining, sending our miniscule reserves of humus, nutrient & water abroad for pennies.

  13. Rebecca McNicholl

    First of all, the highly productive, trade exposed industry that you describe is not receiving a ‘hand-out’. SPC and Holden asked for handouts. Farmers will be loaned money at 4% from the government that they will pay back. Given that the government can borrow money at 3%, the public purse can even make some money from the arrangement.

    Secondly, the farmers that are currently in drought and seeking assistance are not small, unviable family farms. The vast majority are large family and commercial broad acre farms. These are the enterprises that are the powerhouse of the ‘hugely productive and internationally successful industry’ that you describe above.

    Thirdly, I recommend that you do some investigative journalism on the interest rates offered by commercial banks for agricultural loans. Current rates are around 6.5% – 8%. Apparently these rates are higher than those for other industries where bad debt levels are higher than in agriculture. In other words, the interest rates at which farmers borrow do not reflect the relative risk of of their business, and they are penalised as a result. Banks have worked out how to make a mean profit out of farmers.


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