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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David Leyonhjelm

David Leyonhjelm

has worked in agribusiness for 30 years and is a Senator for NSW representing the Liberal Democrats.
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READER COMMENTS

Barcoo
26/11/2014 3:13:03 AM

G'day David. Could not agree with you more. "Farmers who cannot survive drought without help from their fellow Australians should not be propped up...". City people who cannot survive periods of unemployment should not be propped up, they should all become brain surgeons and CEOs. It is very hard for a farmer to prepare for drought when he is legally prohibited from developing his farm. We are still waiting to see you manifest the support for farmers that you voiced in your maiden speech in Parliament.
Howvillu vote
26/11/2014 4:46:37 AM

How does the senator feel about poppies being Tasmania farmers birthright? Should these sentiments be supported, after all this costs all society.
Rylstone Sceptic
26/11/2014 5:17:55 AM

"Farmers are no different to anyone else when it comes to a liking for other people’s money". Speak for yourself, or are you? I find that as and offensive and uninformed a comment as they come, and like many never took a dollar from anyone. I like other peoples money when I earn it fair and square. I don't hear you making any strong noises with respect to ALP Socialism or LNP middle class Socialism. Yep! you are just like the rest in that ivory tower.
Clinton
26/11/2014 5:21:57 AM

I'm pretty sure I can speak on behalf of the Senator in that he supports poppy seed farming, not just in Tasmania but across the country, and he strongly oppose the excessive land management and clearing restrictions that are currently in place. That being said, two wrongs don't make a right, and once you start fixing stupid things government does with more stupid things for government to do you end up with all sorts of debt and waste.
Helen Clark
26/11/2014 5:53:46 AM

I sincerely hope that David never has to suffer the mental trauma that severe droughts cause. Only businesses that rely entirely on farming produce can understand to any extent the affect of Drought. Most farmers do prepare for drought the best way we can but you can only store so much grain and hay. You save money where you can but the emotional toll is the one that is the worst. My physiologist described me depression as being akin to Post Traumatic Stress Disorder. We spend our lifetime building up flocks only to sell them to slaughter and try to keep the best. Try to feed them through
Mug
26/11/2014 6:07:26 AM

Public opinion of a perceived " snout in the trough" mentality is a problem. Farmers definitely do not fit that category. Many others around us do. Time is the problem. Just as a farmer is recovering from the last drought he is hit with falling prices,flood, or more drought etc. Of course farmers want to drought proof themselves-----but they have to go on making an income in the meantime. Giving up and selling to the neighbour is not the answer. There are too many blanket regulations on development which are fair enough in some places but not others. Bureaucracy at its best.
Peter S
26/11/2014 6:16:22 AM

Perhaps if farmers got a fair price for their goods, they might be in a better position to drought proof themselves. As for the pot calling the kettle black, the Australian Govt has blown (read wasted) billions of dollars on the Collins submarines and the roof insulation scheme (to name but two)...and successive governments have had no problem handing out billions of taxpayer dollars to subsidise car manufacturers making cars no one wanted to buy. If climate change is man made and increasingly severe droughts are the consequence... why shouldn't the farmer be given some form of assistance.
JL
26/11/2014 6:30:15 AM

Farmers are land managers. Yes we should work towards our income making business being able to stand alone BUT we are also managing the land for ALL Australians and future generations. If these so-called handouts were renamed for their true reason, "Land Sustainability grants" for all Australians, then it could be seen as successful instead of the farmer always having to make a living and spending a lot of it on the land sustainability factor. It should be directed to cover our land management which is really for a better brighter future for all Australians.
wtf
26/11/2014 7:31:01 AM

David we already know your attitude to drought assistance, why don't u let us know where u stand on the 7 billion dollars high income earners avoided paying in tax via negative gearing last year? as I see it we (farmers) get very little of the perks the rest of society gets, so why don't u stop treating us as special and cast your eyes into other spheres. How about the advantage to the financial services sector thru neg gearing or FRAC res banking?
Geronimo
26/11/2014 7:48:58 AM

And yet there is $3.2 billion sitting in farm deposits.
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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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