$1bn for business and farms to beat drought

Drought-hit farmers and businesses will be offered interest-free loans under a $1bn rescue package.

Scott Morrison said the next round of drought assistance would put money directly into communities and keep wages flowing. Picture: AAP

Drought-hit farmers and struggling regional businesses will be offered interest-free loans under a $1bn rescue package to be unveile­d today.

Amid criticism that the Morris­on government is not doing enough to help farmers survive the drought — which has run for almost nine years in some regions — the package will includ­e loans to small businesses of up to $500,000 each.

The businesses eligible for assista­nce do not presently have access to the same concessional loans available to farmers and are on the margins of remaining viable.

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The package will also include a rewriting of the existing concessio­nal loans scheme for farmers by offering interest-free periods for two years to improve cashflow into farms.

It is expected that more than $1bn in drought assistance loans will be accessed by farmers and small businesses over the next four years. A further $500m will also be redirected from existing regional infrastructure programs to provide direct investment into affected communities.

With the loan funds already set aside in the Regional Investment Corporation, the loan component of the package will have a minimal budget cost of $100m. However, combined with a separate round of measures to be announced today, there is expected to a significant “cash out the door” announcement that will have to be accounted­ for in the mid-year budget updates.

The measures are understood to fulfil some of the recommend­ations from the drought taskforce review conducted by Major General Stephen Day, who was appointed last year to review drought preparedness and report­ed to the government a month before the May election.

The government, however, is believed to have resisted demand­s to extend further the existing Farm Household Allow­ance, which the government has already expanded.

Cabinet met on Wednesday to approve the extra measures and agreed to the package along with further announcements to be made on Thursday on other programs.

Scott Morrison said the next round of drought assistance would put money directly into communities and keep wages flowing while allowing farmers access to cash for stock feed.

“We will continue to keep providing more support as the drought rolls on,” the Prime Minister said. “This is money in the pockets of our farmers to help keep their stock fed and watere­d, their staff and farm hands paid and their crops irrig­ated. We also know the drought has been tough on small businesses that rely on agriculture.

“Shearing contractors, harvesters and livestock transport providers have seen their turnover hit, and in many cases struggle to survive. They’ve been forced to seek overdrafts or additional cashflow finance. Rural communities can’t function without these small businesses; that’s why we are stepping in to provide this extra support.

“The government already provide­s concessional loans to farmers, but now we’re improving the terms. Interest-free loans will make it cheaper for farmers to buy fodder, transport stock, build water infrastructure, agist cattle, mend fences or refinance existing debt.

“Farmers will not have to pay a cent for the next two years, and even after that, interest only on a discounted rate.”

What is known so far is that the extra package will redirect $200m from the Building Better Regions Fund to fund directly immediate infrastructure projects and drought relief projects of up to $10m each in affected regions.

There will also be $139m through the Roads to Recovery supplementary payments for 128 local government areas in drought (up to $138.9m) for projects that are approved and ready for construction.

The $122m Drought Commun­ities Program will also be extended to a further six local government areas for infrastructure projects as well as a new $50m discretionary fund if and when more councils require­ assistance.

The small-business concessional loans include a two-year interest-free period, interest-only payment for years three to five and interest and principal for years six to 10.

Farmers who have already accesse­d the drought loans will be offered the chance to renegotiate existing loan terms to include the two-year interest-free period.

There are expected to be no moves to expand the Farm Household Allowance, which the governm­ent has already extended to cover those families whose acces­s had expired with additional cash payments of up to $7000.

Government claims that it has already invested $7bn in drought relief — including the $5bn future drought fund, which begins in 2020, as well as household assistance — has been strongly disputed by the opposition.

Labor agriculture spokesman Joel Fitzgibbon demanded the government release the full content­s of the Day report and restor­e payments for those families whose allowances have been cut off or are due to expire.

“We have to have a national drought strategy,” Mr Fitzgibbon said.

The Prime Minister has declare­d the drought to be the first priority for the government.

But an internal political feud continues to rage within the National­s over where more drought relief should be directed.

Former Nationals leader Barnaby Joyce had warned that the next election could be won or lost over the response to the drought.

However, other senior Nationals claim that the public quarrel was being driven more by personal rivalries within the ranks of the junior Coalition partner.

Water Resources Minister and senior Liberal National Party MP David Littleproud said the changes to the existing drought loan structure “builds on our election commitment of supporting farmers to restock and replant and now give them the ability to pay for costs in the here and now to get them through the drought”.

“The small-business loan is an acknowledgment that the drought doesn’t stop at the farmgate; it extend­s into the businesses that support them,” he said.