Buying the farmer's vote

I hope many of those with their hands out for assistance get out of farming...

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 reclaimfreedom@gmail.com
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    READER COMMENTS

    overit
    1/05/2013 7:30:14 AM

    If farmers cant access the package they may be better off to through the bank the keys. It has been suggested that a lot of properties have debt levels higher than the value of the property. When all these properties come onto the market with no buyers and no one willing to lend to those who are interested. See what happens to Davids and his bus driving mates superannuation. The super funds own a lot of bank shares and the banks will take huge losses.
    Dave
    1/05/2013 11:03:05 AM

    It already is ludicrous, David, that my taxes are used to prop up your bus driving mates wages and conditions.
    Mark
    1/05/2013 1:30:22 PM

    Hmmm, very short term thinking by governments again. We need vision and a clear pathway to get our grain producers to globally efficient producers
    dunart
    2/05/2013 7:46:31 AM

    well said dave, and thats just the tip of the ice berg, what about the car industry? just to name one of many business that get $'s just buy asking.
    Dave
    2/05/2013 10:27:37 AM

    That's the sickening hypocrisy of the unions, dunart.
    Love the country
    3/05/2013 6:10:55 AM

    Hearing about the $25000 loan, there's only one group to prosper, it's the advisers, with there head in the trough, bet they take the biggest bite. What a trade, farming the farmer, and always getting 2t without rain. sack them all and you will be much better off.
    confused
    9/05/2013 8:27:13 AM

    What have all the WA farm consultants been advising for the last 5 years that has resulted in such a high % of grain growers being in such a crisis? The dollar has been high now for years, not suddenly and grain prices for the 2012 harvest were exceptional. Something doesn't add up here.
    Wato
    13/05/2013 8:00:39 AM

    A big part of the problem can be put back on the plantation tree industry. Which pushed up land prices in the higher rainfall areas and created a wave of higher priced land heading inland, increasing equity on the way. People borrowed to the new values and when the tree industry collapsed so did land prices and equities crumbled. Resulting in the desparate situation we are now in. Land in relation to production values is still over priced.
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    Agribuzz with David LeyonhjelmCommentary, news and analysis with agribusiness consultant David Leyonhjelm. Email David at reclaimfreedom@gmail.com

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