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.

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


Rational Ag Policy
27/11/2014 7:42:22 PM

The waste of a few billion is a drop in the ocean compared to the long term damage subsidies to inept business people have on rural Australias future. Whilst other sectors of the economy march ahead, the majority (but not all) of farmers tread water with returns below 10%ROA. These producers farm because they enjoy it, not because they have any hope of generating profit. For them it's a hobby. These farmers send a clear messages to talented young rural people - Get out now, get a degree and move to the city, as this is a hobby, your talents won't be rewarded here. I real pity.
Bushie Bill
28/11/2014 5:53:30 AM

Berny, for lifestyle farmers, your scheme is no different to a direct condition-free gift. Most grants would never be repaid. Could work though if there were well managed and serious tests of viability but this would never gain the support of agsocs.
jen from the bush
28/11/2014 10:18:28 AM

Farmers tend to produce products which can be sold and make some sort of money for Australia. Whereas Australian polititians will go down in history of wasting untold multi billions given to people so that they no longer take any responsibility for their actions. Not used for any production but completely wasted. If you don't know what I am referring to David, I am referring to the dole and single parents etc. Food tokens yes but why should tax payers money be spent buying tvs grog cigarettes etc. If that money was spent on developing Au instead o
Bushie Bill
1/12/2014 10:34:21 AM

You woulde starve,m2, wouldn't you?
1/12/2014 1:01:38 PM

I don't think so BB, I'm fairly resourceful... and I can spell too! ha ha!.....but really, your reply suggests no logical argument against my point, back in your box tige!
Bushie Bill
1/12/2014 1:11:28 PM

That is a typo, m2. Why are RARAs so ignorant that they are incapable of distinguishing between a spelling mistake and a typo? Did all of you miss out on even some rudimentary schooling?
Frank Blunt
1/12/2014 1:17:09 PM

" woulde" Bill ?
1/12/2014 1:52:39 PM

If you tried typing with two hands for once, Bellevue Bill, you might not make so many typos. But I doubt that would be possible for you selective socialist one handed typists.
2/12/2014 5:47:58 AM

you still don't have an argument BB...all typo's aside. you can't have it both ways although the recent election result in Vic would indicate that plenty of people (mostly urbanites), think that you can.
Bushie Bill
2/12/2014 10:24:30 AM

Just what exactly am I wanting to "have both ways" and what "argument" do I still not have m2? You are promoting anarchism with your mindless no education etc, and the equating of these factor to irresponsible free truck loads of money to all whingeing agsocs is an intelligence-free and common sense-free comparison. As I said, if you had even a third grade level education, you would be able to work it out for yourself. What you learn from the redneck ruffian in the front bar of the top pub in Nowheresville does not count as learned informed opinion, you know?
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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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