While the focus of Nationals MPs in Canberra yesterday was how to better get credit for drought relief and other forms of agricultural support, the National Farmers Federation (NFF) was issuing a draft national drought policy warning that climate change would make drought worse and stressing the need to prioritise “objectives and outcomes that enhance long-term preparedness, sustainability, resilience and risk management for farming businesses and farming communities”.
In question time, the prime minister continued to insist that there was a national drought policy and he was implementing it, despite the NFF offering six reasons why in fact there was no policy, including big differences in drought measures in different states, the “absence of a coordinated approach to drought preparation and management” and the ongoing announcement of ad hoc drought measures “that can undermine drought preparation and resilience”.
Ouch — the very handouts that the politicians are squabbling over the credit for are actually undermining our capacity to deal with drought.
But farmers have been saying that for years. They said it to the Productivity Commission (PC) when it examined drought policies a decade ago. “Efficient farmers who save and invest off farm are penalised, whilst farmers who waste money [and] spend everything get more help,” one told the PC.
“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,” said another.
That’s why the PC urged a switch in the focus of drought policy to funding preparedness and resilience. The practice of governments providing interest rate subsidies to farmers came in for particularly harsh criticism from both the PC and farmers; they “promote ‘worst practice’ farming i.e. to overgraze and overspend in good times, knowing the criteria for subsidy will be met in the drought,” said one farmer.
Interest rate subsidies have now been ended, but something almost as bad took their place: concessional loans to farmers. The PC criticised those too — they encouraged farmers to take out loans that wouldn’t otherwise be justified commercially, though they weren’t as bad as straight handouts.
The PC thought concessional loans shouldn’t be expanded any further, but that’s exactly what Barnaby Joyce did when agriculture minister; indeed, he set up a concessional loan bank for farmers, called the Regional Investment Corporation, for pretty much anything — including managing through and recovering from drought, not just preparing for it. It’s currently offering loans for 3.11%, well below what a small business could borrow on a loan secured by the owner’s house.
The NFF wants concessional loans expanded further and the application process made even easier. In fact, despite its emphasis on funding preparedness rather than rewarding unpreparedness, its draft policy is heavy on handouts. It wants further “improvements” to the recently expanded Farm Household Allowance, expansions in irrigation infrastructure funding (another bugbear of the PC, which has repeatedly criticised irrigation handouts as wasteful), and rates relief.
It also wants to expand the Farm Management Deposit (FMD) scheme — which got a guarded endorsement from the PC — to pretty much anyone in a regional town. Barnaby Joyce already, notoriously, expanded that scheme, which allows farmers to deposit income in a tax-effective savings fund in good years to draw down on it in bad years.
You’d expect during a drought as serious as this one the amount of money in FMDs would fall. But the most recent statistics show that funds in FMDs reached a record level for September 2019, up more than $200 million on September 2018.
Indeed, to its credit, the NFF, citing data from the Australian Bureau of Agricultural and Resource Economics, acknowledges that the agricultural sector generally is doing very well despite the drought. “Although Australian agriculture is exposed to significant risk, with climate presenting the most significant production risk, the Australian farm sector has experienced sustained growth suggesting that farm businesses are largely dealing with risk successfully and sustainably,” it says.
As the PC noted back in 2009, the majority of farmers never need drought assistance — less than a quarter of farms were receiving assistance during yet another “worst drought on record” in 2007-08.
That merely adds to the air of unreality about what’s happening in Canberra, where the struggle is to claim credit for propping up the least efficient, least responsible parts of a successful industry.
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