Explainer: Drought support for farmers in 2024

Farmers in Victoria’s southwest have been calling for a drought declarations in the wake of the region’s ongoing “green drought”. So why hasn’t the government called it?

Farmers in Victoria’s dry southwest have been calling for a return to ‘exceptional circumstances’, or drought declarations, in the wake of the region’s ongoing “green drought”.

But days of such declarations are long gone – and there’s no sign they will be returning anytime soon.

This week, respected public policy expert Wendy Craik advised the federal government to push ahead with its longstanding emphasis on building resilience and financial self-reliance into drought policy, rather than farmers expecting one-off hardship loans to see them through.

In her review of the Regional Investment Corporation Act, published on Wednesday, Dr Craik said the RIC’s operating mandate should be updated to reflect this view.

DROUGHT POLICY HAS CHANGED

The federal government’s drought policy has changed in the past three decades, from declarations that were financially supported by state and federal arms of government through National Disaster Relief and Recovery Arrangements.

Between 1992 and 2012, the federal government would declare Exceptional Circumstances areas, known as drought declarations, which would trigger financial support in the form of grants, interest rate subsidies and income support.

Following a number of reviews of this policy approach that found it inequitable, ineffective and made some farm businesses less responsive to drought, drought declarations were shelved.

Commonwealth-funded farm business concessional loans were offered to support farmers through drought, administered by state governments and the Northern Territory.

This form of support was taken over by the RIC, to achieve a nationally consistent level of assistance when it came into being in 2018, by taking control of concessional loans out of state government hands. .

Having handed out more than 3000 concessional loans worth more than $3.3 billion in the RIC’s six years of operation, Dr Craik this week recommended the RIC be retained and concessional loans continue to be offered to support the agricultural sector.

“Based on the available evidence, concessional loans are an effective policy tool to support long-term viable farmers and farm related small businesses in financial need, particularly during drought,” Ms Craik said.

National Farmers’ Federation president David Jochinke welcomed the finding.

“The NFF views concessional lending as a fundamental and effective tool for farmers,” he said.

More recent drought policy has focused on long-term preparedness and risk management, rather than immediate assistance, taking the overarching view that drought is a normal part of Australia’s climate and a risk that farmers are expected to manage.

WHAT DROUGHT SUPPORT IS AVAILABLE IN 2024

Concessional loans are the main method of drought support available these days – but, despite the support for them, the eligibility criteria make for fuzzy reading.

Farmers need to provide evidence that their business is experiencing “significant financial impact”, which could look like “large reductions in the farm business’s net cash flow” or “large reductions in production and/or yields” – but specific figures about what constitutes “large reductions” is unclear.

The federal government also provides incentives to proactively manage the risk of drought.

The Future Drought Fund was established by the Coalition in 2019 to provide a source of drought resilience initiatives to help farmers and regional and rural communities prepare for the impacts of drought. Each year it makes $100 million available to fund these activities.

Other assistance includes:

The Farm Household Allowance provides financial assistance and help to improve the recipient’s financial situation.

The Farm Management Deposit Scheme allows eligible primary producers to set aside pre-tax income which they can draw on in future years when they need it, such as during a drought.

The Rural Financial Counselling Service gives free and independent financial counselling to businesses experiencing or at risk of financial hardship.

The RFCS has been operating in Victoria since 1986 and has offices in Hamilton, Leongatha, Wodonga and Mildura.

Advisers at the RFCS offer a range of services such as the development of cash flow budgets and negotiations with banks and other lenders.

Each state and territory has its own drought policy and additional support.

Victoria had set aside direct drought payment scheme in October 2019 that has since expired.

Finally, services such as the National Centre for Farmer Health are available to offer mental health support during tough times.