Digging a money pit

Farmers are no different to anyone else when it comes to a liking for other people’s money

WE ALL know that those who fail to learn from history are bound to repeat it, and with drought spreading in Queensland and beyond, I wish I could be more confident that people were listening to their history teachers.

Lesson one is that droughts will happen. The reality of drought always seems to come as a huge shock to city people, who find images of dried up creeks and bones of livestock in the paddock particularly confronting.

But as Dorothea Mackellar told us, you shouldn’t need a degree in meteorology to understand that drought is not a disaster in this country so much as a part of life.

Indeed, any farmer or grazier older than 12 will have experienced drought, and knows that managing it is as much a part of their job description as dealing with stormy weather is part of the job of the captain of a ship.

“They can have the effect of rewarding farmers who managed their farms badly”

The other part of history that I wish we had learned from is that drought assistance programs quickly become a bottomless pit. The Exceptional Circumstance (EC) schemes of recent times gave aid to whole regions for long periods regardless of individual circumstances, gobbling up $2.6 billion on interest rate subsidies alone from 2001 to 2011.

Several reviews subsequently recommended abolishing EC interest rate subsidies, not least because they can have the effect of rewarding farmers who managed their farms badly, and encouraged them to take on debt at the beginning of a drought.

Farmers are no different to anyone else when it comes to a liking for other people’s money, which might explain why the schemes quickly blew out. Many farmers can tell you stories of neighbours who they suspect of rorting the system or who benefited from it despite living on extremely valuable holdings.

The Productivity Commission found that none of these drought assistance programs helped farmers improve their self-reliance, preparedness and climate management. It found that interest rate subsidies and state-based transaction subsidies were ineffective, and can perversely encourage poor management practices. What’s more, it found that household relief payments were inequitable because they were limited to those in drought-declared areas.

Not surprisingly, given these findings, EC schemes were abolished. However, because of our apparent collective amnesia, and the persistence of life-long whingers, they have only been replaced by new handouts that have little more going for them.

“Farmers who cannot survive drought without help should not be propped up or encouraged to sit on their hands”

Using federal money – money that might otherwise be used to lower taxes - state governments are now being allowed to hand out concessional loans that pay little heed to old fashioned market concepts like viability. Where once it was up to financial organisations to decide who received loans, now it is up to state government agencies. It’s a scary thought.

Speaking of failing to learn from history, it will also now be up to state governments to make the inevitable, painful foreclosures. State loans to farmers were discontinued in the 1990s because of the political fallout that inevitably followed.

Right now, these loans not only put farmers deeper in debt, they put all the rest of us further in debt too because they worsen Australia’s budget position. As the drought expands, we will not be able to afford this kind of largesse, however we give it out, and whatever name we deem to give it.

Providing income support to see people through really bad periods is a given, but safety nets are already available for this, as they should be.

Drought assistance schemes should not be considered unless they can be shown to succeed where others have failed. Farmers who cannot survive drought without help from their fellow Australians should not be propped up or encouraged to sit on their hands until it rains. The only incentive they need is the one that motivates any business, which is to remain profitable and sustainable. If they cannot do that, they should sell their property to someone who can.

Socialism was an experiment that failed repeatedly in the 20th century when the money eventually ran out. Dabbling in agrarian socialism will inevitably have the same outcome.

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FarmOnline
David Leyonhjelm

David Leyonhjelm

has worked in agribusiness for 30 years and is a Senator for NSW representing the Liberal Democrats.
Date: Newest first | Oldest first

READER COMMENTS

Independent Farmer
26/11/2014 9:15:57 AM

Geronimo are you suggesting that the money owned by viable farmers sitting in FMD's should be re-distributed to those who arn't? As David says some farmers salivate at other peoples money case in point hey Geronimo?
Fred
26/11/2014 12:50:02 PM

Hi, please take a study tour to Somalia and luxuriate in the paradise that is a country without government. There you will see libertarianism in all its glory! You know, sometimes things just arent profitable. We need government for these things. That includes drought assistance. It also includes emergency assistance and disaster relief. Its human nature to provide a non profit based response to these things... you speak for the 0.001% david, a lunatic fringe.
rusty
26/11/2014 7:35:07 PM

Another sleight of hand by many misguided voters for another electoral term and guess what, David, you will be receiving other people's money courtesy of Australian taxpayers' money for your gold plated ex-parliamentarian's superannuation fund.
dogsbody
26/11/2014 8:09:45 PM

The tax breaks on self managed super, subsidies to miners making multi billion profits, exploitation of tax loopholes by multinational via inter company loans and transfer of profits to subsiduary companies. 100's of billions of dollars as opposed to a couple of hundred million to help our own. Get serious and chase the serial tax dodgers
EH
27/11/2014 8:48:36 AM

You say Farmers are no different to anyone else when it comes to a liking for other peoples money David. Actually I beg to differ with you. Most farmers are less interested in other peoples money than most other people. Your statement is an urban myth. But it seems you are at the top of the list of people liking other people's money with total costs of well over $250k a year for us taxpayers to cover your costs as an MP. That is guaranteed for 6 years with guaranteed increases or reviews totally disconnected to markets, weather, our economy, or your performance.
mark2
27/11/2014 10:07:05 AM

Must be a great gig for you David sitting in the great house of the senate (having, in my opinion, cheated your way in), enlightening us all with your profoundments. I'll probably go along with your theory but only if it is applied equally to all parts of our over-entitled society. "many farmers"...could probably tell plenty of stories about waste and mismanagement in just about every sector of government and industry they have to deal with. Hope you don't fall of your pedestal and hurt yourself
Bernard
27/11/2014 10:15:30 AM

Perhaps if we ran a program similar to the Higher Education Load scheme framers could receive assistance but only pay it off when their revenue climbs above a pre-destined level. This is a sustainable way of managing all issues from drought to farm improvement.
Frank Blunt
27/11/2014 10:48:05 AM

Your pissing into the wind EH , most city slickers have never been west of the sandstone curtain and would not understand anything about rural life nor would they know a sheep from a cow. Ask anyone in Sydney have they been to the bush and they will say Yep , Wisemans Ferry. What a joke.
Bushie Bill
27/11/2014 2:06:46 PM

And, David, they want it interest-free, because they are "special people", and they are special people because they are farmers.
mark2
27/11/2014 5:33:50 PM

yep, that's right BB, just like a fair proportion of the rest of the population, everyone's on the take....which is why we're in trouble. If the farm sector is not entitled to assistance, then in my book nobody else should be either. No "free" education, medicare, PBS, pensions, Banking sector guarantees, award based wage systems, subsidised Public transport, free school buses for students etc etc etc. lets have the market determine everything.
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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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