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Opinion: Drought assistance does not equate to propping up ‘unviable’ farming businesses

Rebecca McNicholl*, 14/03/2014

 

Over the last fortnight, many journalists and their readers have expressed opposition to the federal government's $320 million drought-relief package.

This opposition stems from a reluctance to prop-up 'unviable' industries, and a distaste for the inequity of supporting one struggling industry over another: 'why do farmers get assistance when the likes of SPC Ardmona and Holden don't?'

The debate around industry assistance is complex and emotive; however, it is incorrect to represent drought-affected farmers and their businesses as unviable and reliant on hand-outs.

By Australian standards, those seeking drought-assistance operate relatively productive enterprises. The majority of drought-affected farmers are located in the broadacre farming and grazing regions of Australia.

According to the Australian Bureau of Agricultural and Resource Economics Sciences (ABARES), the productivity of the broadacre industries grew by an average of 1% per year over the period of 1977/78 – 2010/11.

This may appear modest until compared to the productivity growth rates of Australia's twelve major market sectors. According to the Australian Productivity Commission, the average annual productivity growth rate for these market sectors was 0.8 % over the period of 1989/90 – 2011/12.

Leading the charge was the market sector of agriculture, forestry and fishing with a productivity growth rate of 3.1% per year. Its closest rival was financial and insurance services market sector at 2.8%. Manufacturing came in at 0.3% and mining at -1.8%.

In asking for the federal government's assistance, broadacre industries are not doing so because they're made up of inefficient enterprises. They are doing so because they are facing periods of no income for 12 months or more due to unprecedented extreme weather conditions.

Meanwhile, operating costs have continued to increase and farm-gate returns have continued to diminish.

The assistance offered by the federal government to drought-affected enterprises is reasonable when compared to the industry assistance packages requested by SPC Ardmona and Holden.

Of the $320 million, approximately 90% ($280 million) will be made available in the form of 5 year term loans with a concessional variable interest rate of 4% (standard bank interest rates for agricultural loans currently vary from 6.5% – 8% according to one broadacre farmer). This money is not to be used for co-investments or subsidies, as was the case with SPC Ardmona and Holden. Rather, this money is to be paid back –with interest – to the government.

A portion of the package will go towards the payment of the Newstart allowance to eligible families. Farming enterprises are generally asset rich (due to money tie-up in land and farming equipment) yet cash poor (due to seasonal and sometimes sparse income generation); this situation is compounded by extreme climatic events, such as drought and flood.

Temporary access to the modest Newstart allowance in order to put food on the table is an entirely reasonable and necessary concession to make.

Three percent of the package, or $10.7 Million, will be spent on social and mental health services in drought affected communities.

This money will go somewhat towards redressing the gross inequity that exists between urban and rural populations in accessing healthcare services. In addition to vulnerability to climatic and economic change, the National Rural Health Alliance lists poor access to health care services amongst the factors contributing to a suicide rate in regional and remote areas that is 1.2 to 2.4 times higher than in major cities.

Another three percent will be used for the management of pests such as 'wild dogs eating sheep'. Given that the Australian public was prepared to forego tens of millions of dollars in export revenue to prevent the maltreatment of live cattle in Indonesian abattoirs, it is a foregone conclusion that they would be supportive of a $10 million dollar program aimed at preventing malnourished sheep in their own country from being disembowelled and eaten alive.

Naturally, it would follow that the public would also support using the remaining $12 million as a contribution to existing state government emergency water infrastructure rebate schemes, so livestock and native animals, numbering in their thousands, can be watered and spared a torturous death by dehydration.

Thus, of the total $320 million drought assistance package, only $12 million of it can be realistically compared with the $25 million 'co-investment' requested by SPC Ardmona, or the widely reported $150 million per year subsidy required to keep Holden operating in Australia.

The main beneficiaries of the government's drought assistance package won't be multinational corporations, as would have been the case for SPC Ardmona and Holden. They will be family businesses, of whom the majority run a tight ship and do not plan their businesses around generous government hand-outs.

Unlike SPC and Holden, these family businesses are required to pay back 90% of their overall assistance package plus interest. And they will, as these people are in it for the long haul. They are resilient, have a strong affinity for the land and its conservation, and make decisions based upon the best interests of future generations. Australian agriculture will outlast any tourism fad, manufacturing upturn, or mining boom. That is, unless it never rains again. In which case, we'll all be ‘rooned.

 

* Rebecca McNicholl is an environmental engineer and a beef producer from Queensland's Darling Downs.  

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