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(Image: AAP/Dan Peled)

Is there a less scrutinised area of public funding than drought relief? The government today has announced — via drops to the media — another billion dollars to be handed to a key industry ally of the Coalition, and there is virtually no analysis from the media and no objection from Labor — which if anything will criticise the package for not being big enough.

If colossal sums of money in free loans were handed to the finance industry, or the construction sector, or manufacturing, specifically targeted at groups that support the government, at the very least there’d be media debate about how worthwhile an investment it was — or even Utegate-style allegations of corruption.

Connections would be made between the donations made by the relevant industry and the largesse they enjoyed from the government. But “drought relief” has a special magic that makes it immune to rational assessment.

Despite talk about switching the focus of drought funding to resilience rather than handouts, the government has once again focused on being an ATM for its supporters. The latest package expands agricultural concessional loans to any regional business, makes existing concessional loans cheaper still, and hands money to rural councils for make-work projects with no benefit-cost analysis.

Concessional loans are a damaging form of assistance that encourages recipients — the ranks of whom have now been massively expanded — to undertake investments for which there is no sound business case. The only — limited — benefit is that they are better than a handout. But with the repayment period for existing cheap loans extended, they’re becoming more and more like the latter.

Why shouldn’t other small business get access to interest-free loans? What about retailers, doing it just as tough in a struggling economy where households have had their spending curbed by wage stagnation and the government’s rapidly increasing tax take?

How about manufacturing, which lost 100,000 jobs — a third of the entire agriculture workforce — in the year to August? Those workers have to find jobs elsewhere, and possibly move to do so, especially if they’re in regional centres, where manufacturing has been hit hard by energy price rises. Why is it that an industry that is closely aligned with the Coalition gets help and other struggling sectors don’t?

That concessional loans are a counterproductive form of assistance has been known for years. So has the fact that drought assistance punishes those who have invested in resilience and rewards the lazy and profligate. These facts have been on the public record for at least a decade, since the Productivity Commission examined drought relief and found it fundamentally flawed in 2009. Even the National Farmers Federation has criticised handouts “that can undermine drought preparation and resilience”.

Yet you’ll look long and hard through the media’s coverage of successive drought packages to ever see that reflected. To the Financial Review’s credit, today it editorialised against yet more handouts to farmers and explained how counter-productive they are. But the bulk of the coverage of drought policy has consisted of sympathetic stories of struggling farmers or race-calling political stories about angry Nationals MPs and how the drought will factor into the Press Gallery’s favourite shiny thing — yet another leadership spill.

Yet more drought relief is a sugar hit for a Coalition-friendly sector already glutted with handouts — and particularly for farmers who haven’t made the hard choices to make their properties and their operations more resilient and more sustainable. Other industries doing it tough for reasons for less under their control can only look on in envy. Maybe they need their own political party too.

Peter Fray

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Peter Fray
Editor-In-Chief of Crikey

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