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

Bushie Bill
2/12/2014 10:30:37 AM

Thank you for the advice, FFS. I know you have had more success in some things with two hands rather than one.
Jacky
2/12/2014 11:46:53 AM

By all the weeping and gnashing of teeth I think you have touched a nerve, David.
Mabel Peyton Smyth
2/12/2014 2:14:19 PM

Drought and agriculture is a little like trying to cross a busy highway at night. Eventually you are sure to be cleaned up. So try another route and if you cannot find one move on. would any prudent person go into business knowing that there was a probability that without a handout they would go broke. The argument that we need fibre and food does not hold up if the supply is spasmodic. It is a very cruel world as the majority of people in the world know. Also exceptional circumstances are vastly different to drought
Richard Wilton
3/12/2014 4:23:11 AM

I know of very few farmers who have received drought subsidies and any that is given does flow through to other rural businesses and communities. How about you concentrate your efforts on reducing handouts to our city cousins, oh no you won't do that, there are too many votes to lose in the city.
newbroom
3/12/2014 9:57:14 AM

this bloke should stick to appealing to no hoper donkey voters. What a crock he is!
White Feather
3/12/2014 1:58:40 PM

From one who willingly served this great Nation I feel ashamed that this bloke almost controls this country sitting in his red chair in the Senate preaching to us what is good for us. I would like to ask David to go and do something useful but it would not get printed.
Weddin
3/12/2014 3:21:43 PM

Rusty mate, David doesn't have a hope in hell of two terms in the senate unless lighting strikes the same spot twice with a number one on the ballot paper.
genazzano
3/12/2014 4:38:55 PM

Don't worry David will have his pollie super for the rest of his days and under a different set of rules to you and me - I suggest David not take it !!!!!!!!!! or maybe he should help the nation by spending his time with same sex bills - read your history David - Roman Empire Greek Empire American Empire all gone US has $18 trillon debt
Rational Ag Policy
3/12/2014 6:56:04 PM

Richard - despite being unfair, the handouts are not the big issue. It's the perpetuation of farming as a hobby by people who struggle to turn a profit because they are no good at what they choose to do. As a result rural Australia is stuck in an unprofitable rut, chances are it won't get out. Ever gone to the city and wondered why they are so well off. It's because they reward talent and ensure businesses are run by the most talented people, dead wood is quickly cut out. If you really want to see rural Australia flourish, unhobble good farmers by not propping up bad farmers.
wtf
4/12/2014 5:36:42 AM

RAP, have u considered farming has had its processing and infrastructure sold out from under its feet to the vested interests? therefore we are trying to outcompete in the bulk commodity mkt with no product differentiation and all our competitors receiving subsidies and tariff protn. Have u looked at household debt levels in urban aust, a recent report showed mortgage % of household income had gone from 20%(70's) to 130% today. Aided by subsides like neg gearing and regulated wages. I think if u picked up the cities and shook them, a few coins might rattle out of their pockets and that's all.
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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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