Squabble delays funds

30 May, 2013 02:00 AM
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THE anticipated $60 million Federal Farm Finance Package appears no closer to reaching farmers, despite details of the package finally being released.

This week Federal Agriculture Minister Joe Ludwig confirmed the Federal Government would be responsible for any defaults on the low-interest concessional loans to farmers, which will start with an interest rate of 4.5 per cent a year.

But while further detail is now known, it is still unclear when farmers will actually be able to access the funds, as State and Federal governments continue to blame each other for the lengthy delay.

The issue now seems to be around administration costs, which the Federal Government is expecting the States to pay.

WA Agriculture and Food Minister Ken Baston, however, in a letter he sent to Mr Ludwig on Tuesday, said administration costs would cost the State about $5m.

In the letter, Mr Baston recalls a discussion he had with Mr Ludwig on May 5 saying they had in-principle agreement that administration costs of the loans would be deducted from the interest payments.

"At the meeting you indicated that you were supportive of the above conditions and would leave it to our respective departments to finalise," Mr Baston said in the letter.

"On that basis, I urge you to gain Cabinet approval for the Commonwealth to cover the costs of the administration of this program, or, failing that, to allow the States and Territories to deduct the costs of the program from the interest payments."

Mr Baston said it was at odds with a statement he got from Mr Ludwig previously that the Commonwealth would forego interest repayment, sufficient to enable State/Territories to meet administrative costs.

He said it was also not in line with the Commonwealth's past practice of covering most, if not all, of the costs in the administration of these sorts of schemes.

Mr Baston was referring to the Drought Pilot Program where there was an increase in the budget allocation to cover the administration of the Centrelink initiatives for farmers.

"To not offer to meet these costs in the original package to States and Territories is surprising, particularly when there are repeated representations to the media that the money is available and ready to go," Mr Baston said.

Last week it was revealed the tensions were growing between Mr Baston and Mr Ludwig over the finance package.

Mr Baston, it seems, is not the only State Minister who was frustrated with the lack of detail from the Federal Government with reports from Queensland and Victoria also expressing their disappointment in the lack of detail in the package.

But again this week Mr Ludwig stood his ground on delays in delivering the package saying the States were the ones dragging their feet and playing politics.

Mr Ludwig wrote to each of the relevant Ministers last Friday following up on another letter sent on April 27, where he outlined details of the response package.

He provided copies of each letter to Farm Weekly and expressed his frustration at the ongoing delays.

"We've put the money on the table and we've put the facts on the table," he said.

"We're the one fronting up with the cash.

"All we're asking of the States is for them to administer the program, as they have done for Exceptional Circumstances support and other programs for decades.

"It is time that the States and the Northern Territory put some skin in the game and started standing up for farmers.

"The longer the States plays politics, the longer farmers are abandoned in the field."

In the letters, Minister Ludwig confirmed the concessional interest rate for the loans would be 4.5pc.

"The concessional rate will be applied on a nationally-consistent basis," he said.

"At the end of the five-year concessional period, the loans will revert to commercial interest rates, which are currently around seven to eight per cent.

"The interest rate will be updated on a six-monthly basis in line with changes to the five-year Australian Government bond rate, to ensure it remains relevant to prevailing economic conditions."

Mr Ludwig also addressed concerns about the default risk associated with concessional loans.

He said the Australian Government would be ultimately responsible for defaults on any loans.

"However, in establishing a concessional loans scheme in a State or the Northern Territory, the Australian Government will seek to ensure that delivery agencies have in place the appropriate assessment and compliance processes to reduce the risk of default occurring," he said.

"I would emphasise that the Commonwealth is committing around $440m in funding to support farm businesses experiencing debt stress throughout the nation.

"I would be extremely disappointed if farmers in need of immediate assistance were disadvantaged by a State refusing to contribute only the administration costs of the concessional loan element."

It's expected the loans of up to $650,000 are expected to save struggling farmers about $100,000 or roughly $1600 a month in the first five years compared to an average commercial loan.

p So far the State's $7.8m Assistance Package has seen 156 applications for the financial support payments of $25,000 per farm business, with 39 applications approved and three already paid.

Seven shires (Kellerberrin, Kulin, Corrigin, Narembeen, Yilgarn, Westonia and Bruce Rock) have accepted the $10,000 grants offered to 16 shires.

But only three inquiries have been made to the Department of Agriculture and Food WA (DAFWA) for the social support and rural counselling service grants with one application being approved.

Five inquiries have been made for the $20,000 farm exit support grants, with no official applications.

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