A few weeks back Crikey optimistically wondered if, by emphasising the need for resilience on the part of farmers in the face of drought and climate change, Malcolm Turnbull was ushering in a new, more sensible approach to drought relief. Yet again, the Prime Minister has disappointed us.
Yesterday, another $190 million was handed out to farmers in a major, and heavily promoted, drought relief announcement, bringing total drought relief programs currently on foot — including profoundly wasteful subsidised loan programs — to $576 million. That’s even bigger than Turnbull’s gift to his Business Council mates at the Great Barrier Reef Foundation. And, he says, there is “more to come.”
That’s on top of the lazy half a billion Gladys Berejiklian threw at farmers last week. It’s raining dollars on our second most subsidised sector after manufacturing, if not actual rainfall.
These aren’t merely unjustified subsidies for a politically influential sector which has a small but disproportionately powerful minority group in the governing coalition at both the New South Wales and federal level. Subsidies are normally simply a waste of money, an economically inefficient use of taxpayer money that could be better directed elsewhere. But drought assistance actually punishes our more efficient farmers.
If we go back to the searing Millennium Drought of the 2000s — a far worse drought than the current one, and held to be the worst drought since the Federation Drought at the start of the 20th century, and possibly the worst since white invasion — nearly 70% of broadacre and dairy farms did not need “Exceptional Circumstances” assistance in the worst years, from 2002-08, according to the Productivity Commission.
And, “overall, of the 143 000 farms in Australia (with an estimated value of agricultural operations of $5000 or more), only 23 per cent received EC support in 2007-08.”
Why? Because most farmers were prepared for drought. As the commission noted:
This high level of preparedness reflects an accumulated understanding of Australia’s climate variability. Many farmers have rainfall records going back 120 years and, depending on where their farms are situated, can readily point out the Federation drought and the long dry spell in the 1940s. Most were farming through the droughts of 1982 and 1994.
As a result, handouts create a perverse incentive for a minority of farmers. As the commission pointed out in its examination of drought assistance arrangements while the Millennium Drought was coming to a close, they lead to “some farm businesses failing to adopt self-reliant strategies, such as earning off-farm income or building financial reserves as a hedge against drought risks, in the belief that governments will support them during droughts” and “recipients being less responsive to drought conditions and being financially assisted to continue business-as-usual.”
Many farmers who make the investment and sacrifice for be prepared, unsurprisingly, aren’t impressed. The commission assembled some quotes from them:
The same producers are queuing every time assistance is offered which proves there is no adapting to seasonal variability. … Those of us who have embraced new technology and diversification are excluded from assistance as [we] are self-sufficient.
It is disconcerting to see a number of ‘inefficient’ graziers … receiving drought assistance when they have done little to plan and manage the risks of drought …
Efficient farmers who save and invest off farm are penalised, whilst farmers who waste money [and] spend everything get more help.
[EC interest rate subsidies] promote ‘worst practice’ farming i.e. To overgraze and overspend in good times, knowing the criteria for subsidy will be met in the drought
These kinds of complaints never register with politicians or the media. One of the few media critics of the latest round of handouts is the AFR’s Aaron Patrick. We’ve bagged Patrick on other issues before, but he correctly pointed out that both experts and some farmers question the need for the latest round of handouts. He also noted the lack of means testing means very wealthy farmers will enjoy the taxpayer largesse as much as the struggling family down the road.
While we’re currently being told how agriculture faces yet another crisis, in fact it has been one of Australia’s biggest productivity success stories of recent decades, with consistently strong growth in both production and exports while massively reducing its workforce. It’s not an industry that needs handouts, especially not when they punish efficient farmers who manage their properties wisely.
What do you make of the Prime Minister’s drought relief plan? Let us know! Write to [email protected].