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

stockman
6/12/2014 5:09:17 PM

What has the Senator done to help Australia-apart from paying tax on his lucrative $200,000 a year? That doesn't include the perks that goes with the job. And apparently no skills are necessary to be a senator.
X Ag Socialist
7/12/2014 8:06:41 AM

So speaks a man who won his senate seat with other people's votes.
LOWEST COMMON DENOMINATOR
7/12/2014 12:15:02 PM

Having decimated farmer numbers by various forms of attrition (eg. read dairying) over the last thirty years does the good senator and his ilk need to do a stocktake? What is the ideal number of family farmers required to efficiently manage Australia's farmland? When this ideal number is ascertained, (do we need more farmers or less farmers, or do we collectivise farms?) how do we arrive at this figure, and armed with this calculation what new measures do we put in place to stabilise and maintain these numbers? Have those remaining farmers been lucky or efficient or both? Get rid of more?
Rational Ag Policy
8/12/2014 4:38:02 AM

WTF - by artificially inflating rural land prices (through support mechanisms and a culture that encourages farmers to hang on at all cost and regardless of an ability to do so) we are doing exactly what to don't like about negative gearing. But this time it's done to future generations of farmers.
wtf
8/12/2014 6:37:18 AM

I don't disagree with u RAP however I feel the govt should recognise the problem our fract res banking model has created and taper it down. To just cut their throats and throw these people to the side shows no compassion and recognition of the problem the govt has created in the first place. A gradual transition should be the preferred method in my opinion. Raising interest rates and reducing the availability of credit is the first steps to doing so.
Bushie Bill
8/12/2014 8:41:07 AM

or to be a stockman, it seems stockman.
Bushie Bill
8/12/2014 8:49:18 AM

QED,m2, the rest of Australia has to stand on its own two feet. It is only the agsocs that believe they are special people and demand special treatment available to them and them alone. PS I'll back my knowledge of how the real world works against your belief that the world is supposed to work only for the benefit of "begging bowls held high" whingeing agsocs any day of any year, m2.
Aussi Sheila
9/12/2014 12:47:51 PM

Offensive.......... "Worked in agribusiness for 30years " and? Has he ever been a real farmer?
Richard Wilton
9/12/2014 5:11:38 PM

The handouts farmers get are a very small percentage of what we actually earn in export dollars for this country. It seems logical to give a bit back when faced with such a diabolical situation.
mark2
10/12/2014 5:00:52 AM

Well, BB, if the rest of the country has to stand on its "own two feet", why do we have to have a regulated labour market, things like the "Fair work commission"? As I have said repeatedly, you have missed the point, I'm not arguing for farmer welfare, I'm saying that you don't acknowledge the hypocrisy of your own musings. The safety net of social welfare gone mad , throughout the western world has left most nations at a point of insolvency that is almost unsurmountable, no-one seems to want to address it and you want more of it?
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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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