Farmers get their pork

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From Crikey today the Government is accused of more inconsistency around entitlement as it approves a farmer’s bailout package:

In 2009, the Productivity Commission produced a report on drought assistance that was scathing of the National Drought Policy and the “exceptional circumstances” trigger that Labor had inherited from previous governments. Exceptional circumstances payments, it said, did “not help farmers improve their self-reliance, preparedness and climate change management …Governments need to commit to a long term reform path that recognises that the primary responsibility for managing risks, including from climate variability and change, rests with farmers”. rected to this end but have mainly flowed as emergency payments to a minority of farmers in hardship and to stressed farm businesses.”

…the bulk of today’s package — $280 million — is via cheap debt: “drought concessional loans” will be made available “for debt restructuring, operating expenses and drought recovery activities”. There’s little detail about the loans, but they appear to be a big expansion of the existing Farm Finance Concessional Loans Scheme, under which farmers can get cheap loans with an interest rate that goes up when circumstances improve. The Productivity Commission criticised exactly this form of cheap debt in its review:

“The Commission does not support offering concessional finance to a group of borrowers to induce them to borrow at a higher level than their own risk preferences would allow. A greater sensitivity to a loss of the farm due to the high non-monetary value placed on farming is rational and does not provide an efficiency case for measures to encourage farmers to take on more debt.”

In short, if farmers can’t access borrowings from the market at existing commercial rates, giving them access to below-commercial rate loans merely encourages risky behaviour.

 

16 Responses to “ “Farmers get their pork”

  1. saintmatthew says:

    ‘All animals are equal, but some animals are more equal than others.’

  2. speculator says:

    IMHO this sentence is more appropriate: “The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”

  3. Janet says:

    “I’m not asking the Government to give farmers a hand-out” blurted Bob Katter” What I’m saying is that the Government can borrow at 3%, right, so they should, and lend to the farmers at 2%….”

    • Nunatak says:

      Now I know why Katter wears that ten-gallon hat.

      It’s to store his tongue in so he doesn’t keep tripping over it.

  4. Rocksteady says:

    Straight from the horse’s mouth in the report:

    The same producers are queuing every time assistance is offered which proves there is no adapting to seasonal variability.Those of us who have embraced new technology and diversification are excluded from assistance as [we] are self-sufficient. (G. Schmidt)

    It is disconcerting to see a number of ‘inefficient’ graziers … receiving drought assistance
    when they have done little to plan and manage the risks of drought … (J. Cooper)

    … the current exceptional circumstances assistance system does not encourage the efficient operation of farm businesses through economies of scale, in fact they encourage the opposite. (L. Mann)

    Efficient farmers who save and invest off farm are penalised, whilst farmers who waste
    money [and] spend everything get more help. (H. Clark)

    A farmer who has diversified risk, managed borrowings conservatively, kept operating costs low and planned a financially secure retirement is less likely to qualify … (P. Wallace)

    • Peachy says:

      It is basically the QANTAS/Rex issue, but in a different industry.

      Government turning losers into winners, to the disadvantage of those who might otherwise be winners.

      The profilgate/inefficient farmers should be forced to sell their farms to their more efficient neighbours at fire sale prices. Simple.

      • Rocksteady says:

        Yeah exactly, there is nothing wrong with a business failing. At the very least these “struggling” farmers should be forced to improve their business practices if they want cheap credit.

        As it stands it’s just a no strings attached handout to the detriment of their fiscally responsible neighbours.

    • Mining Bogan says:

      Didn’t our government once introduce some sort of income equaliasation program to help farmers even out the good and the bad times? I wonder what sort of percentage take up there was.

  5. jelmech@bigpond.com says:

    Drought prone areas have no business case.
    EOS

  6. Ronin8317 says:

    Lending money to farmers doesn’t solve the underlying mismatch between income and expenditure. There is almost no income during a drought, but the loan repayment remains constant. Having loan interest rate increase when ‘times are good’ is also backward, and it gives the farm an incentive to make sure times are as bad as possible.

    Funding for small to medium farms must shift to a profit sharing model instead. Otherwise, the Australian farm will become extinct before long.

    • StatSailor says:

      If it is acceptable for Australian manufacturing to become extinct, why not Australian farming?

      Even in its current emaciated state, manufacturing employs more people.

  7. flawse says:

    Same old ignorant tripe still being written especially from Crikey. There is no way Crikey coul;d ever change its writing because it accepts no input that is in any way different to its preconceived bias and bigotry.

    What does the article say that is in anyway new or thoughtful??? SFA! Total waste of time and comment on it is a waste of time.

    Farmers have had 60 years of a large proportion of their incomes confiscated by an overvalued dollar just so city people could live beyond their means and the means of the country.
    The same applies to maunfacturing.

    Now the literati sit around with nothing to do in their privileged lifestyle but find fault with everything…in this case with every single thing that a Liberal Govt might be doing. They enjopy their lifestyles, their coffee shops, their restaurants, their cars, their houses all paid for by industries that are being bled to death.
    Then we wonder why they need assistance? Further,if they get any, the whole lot then sit around on their arse and criticise them.

    Nothing much changes in MB.

    • bobalot says:

      In that entire angry rant, you didn’t bother to explain why inefficient farmers with financially unsustainable farms in drought prone regions should get a hand out.

      I lived in Wollongong when manufacturing collapsed in the 1990′s. We didn’t get a handout. Why should farmers?

    • StatSailor says:

      To me a crucial difference between the manufacturing situation and the farming situation is that more than half of farmers are self employed. To me that means that they are in control of their own situation to a far greater degree than manufacturing workers whose jobs vanish as soon as senior management (who in this day and age are as likely as not to be based outside Oz) decide things have got tough. Hence, my view that manufacturing workers are in need of equal or greater, not as the Abbott government would have it, lesser protection.