WHEN other people’s money is being thrown about with more than usual gusto, it is usually a sign that an election is not far away. Hence last week’s announcement of assistance to farmers “struggling with acute levels of debt”.
The assistance comprises low interest loans, more rural financial counsellors, an attempt to establish a nationally consistent approach to farm debt mediation, modifications to Farm Management Deposit rules plus loans to state governments to deliver the concessional loans.
Although theoretically national in scope, it is primarily aimed at farmers in WA.
Why are debt levels “acute”? The government says it’s because of the high dollar and depreciation of land values. WA property values are declining because of a run of poor seasons leading to a surplus of properties for sale.
The banks are naturally cautious about lending more money against depreciating assets, so some farmers are struggling even to fund the purchase of seed, fertiliser and chemicals to allow them to put in a crop.
The loans are subject to viability criteria and must be repaid within two years, which will necessitate access to commercial funding by then. Many of those who can’t raise bank finance now won’t be able to in two years’ time. And even if they qualify for a government loan, should this year’s crop be poor or prices low, the government could end up applying its own mediation rules to negotiate the forced sale of properties.
In fact, the more you look into this assistance package the more you realise it is primarily window dressing.
The farms that most need the loans will fail to qualify for them. Neither the exchange rate nor property prices will be affected by them. Increasing the number of rural finance counsellors from 110 to 126 will hardly be noticed. Standardising farm debt mediation won’t change much. And the changes to FMDs will predominantly help those who generate off-farm income.
As for the loans to the states, that looks like a formula for another blame-shifting argument. Why should a state government be required to repay the funds it expends on delivering a federal government loan program? Loans to farmers will (mostly) be repaid, but the states won’t be able to recover their costs.
But if it is window dressing, why is buying the votes of farmers important? There are not that many of them and most are located in safe Coalition electorates. Where is the political risk to a federal Labor government in leaving it all to the states?
An intriguing aspect is the involvement of Bob Katter in the announcement. Described in Queensland as “all hat and no cattle”, Bob is a fervent agrarian socialist. As far as he’s concerned, introducing EU-type farm subsidies should be just the beginning.
The Gillard government has been schmoozing him lately, with the result that he has voted for or avoided voting against certain key legislation. His new party is also predicted to steal votes away from the Coalition, so these announcements may be mainly intended to keep Bob happy.
I hope that’s the case and, as a result, very little money goes out the door.
I have a friend who drives buses in Sydney. It would be ludicrous if his taxes were used to lend money to people he has never met, in a state he has never been to, who have already borrowed more money than they should. Especially with millions of dollars in equity in CBH inaccessible because of foolish notions about grower control.
In fact, I hope many of those with their hands out for assistance get out of farming and take up driving buses, and Bob Katter joins them. They might then have more respect for other people’s money.
David Leyonhjelm has been an agribusiness consultant for 25 years. He may be contacted at email@example.com