Introduction
4.1
Since 1992, the Australian Government has had the policy aim of supporting farmers to manage climate variability through better preparation and self‑reliance. A wide range of Australian Government support measures are currently available to assist farmers and farm businesses impacted by drought. This includes the Farm Household Allowance (FHA), Regional Investment Corporation (RIC) loans, the Farm Management Deposits Scheme (FMDS) and the Agriculture Stewardship Package. Submitters largely welcomed this assistance. However, concern was expressed to the committee that many people needing support were ineligible or being discouraged from applying due to restrictive eligibility criteria, unclear communication and complex application processes. This evidence is discussed below.
Income support, loans and taxation measures
Farm Household Allowance
4.2
The FHA provides assistance to farming families experiencing financial hardship through planning and training for long-term financial improvements, as well as income support for up to 4 years. The FHA is designed to help farmers make important decisions to improve their long-term financial situation.
4.3
Submitters were largely supportive of the FHA. For example, the Tasmanian Farmers and Graziers Association (TFGA) submitted that the FHA 'is an important initiative in providing producers financial support needed during the drought'.
4.4
The committee also notes that the Australian Government recently amended the FHA program settings to introduce an expanded off-farm income offset, increase the maximum time a person is able to access the FHA program and introduce a one-off lump sum payment for recipients who have exhausted 1460 days of FHA.
Administrative burden
4.5
Despite these improvements, several submitters raised concern that farmers may not be aware of the FHA or are daunted by the application process. Mr Tony Mahar, Chief Executive Officer, National Farmers' Federation (NFF), stated that 'the last thing that farmers need when they're really struggling in terms of drought is to have to wade through pages and pages and hours and hours of paperwork'.
4.6
A number of submitters, including the TFGA and the NFF, encouraged streamlining administrative processes for drought support. The committee heard that the application process was of particular concern for local governments in drought-affected areas. The Australian Local Government Association (ALGA) explained that prior to the Australian Government's simplification of the FHA application process several local governments had allocated staff resources to assist farmers to complete the application.
Unclear communication
4.7
The committee received evidence that unclear and complex communication for some producers is a 'serious impediment to producers completing paperwork to receive financial support'. The TFGA argued that 'it is [] imperative to communicate to producers that this support is available'.
4.8
The TFGA also noted that industry engagement is needed 'to help ensure messaging to producers on drought management and preparedness is consistent'. The NSW Irrigators' Council echoed this view. It informed the committee that collaboration is a key guiding principle for the organisation and 'Government and industry must work together to ensure communication is informative, timely, and accessible'.
4.9
The committee also heard calls for communication campaigns targeted at primary producers to provide information on available financial assistance and how to access support. The TFGA argued that this is important and warrants further investment.
Pilot program
4.10
The TFGA called on the Australian Government to implement a pilot program to test support for FHA recipients 'as it will become increasingly important for producers to make decisions to help sustain their business under increasing financial and environmental stress'. The committee notes that the same recommendation was made by the Coordinator-General for Drought in 2019. However, no such pilot program has been carried out to date.
Regional Investment Corporation loans
4.11
Support for farmers and farm businesses is also available through concessional loans administered by the RIC. The committee heard that since its inception on 1 July 2018 the RIC has approved more than 1600 total loans valued at more than $1.75 billion.
4.12
The committee received evidence that there exists very high demand for concessional loans due to continued drought conditions. Submitters were largely supportive of the RIC concessional loans—the NSW Irrigators' Council noted that '[t]he option of subsidised loans is often favoured by farmers, as this provides the flexibility to carry on in severe circumstances, whilst feeling dignity of paying it back in the future'.
4.13
A number of submitters stated that these concessional loans have had a positive market impact. For example, the RIC and Mr David McKeon, Chief Executive Officer, GrainGrowers, shared the view that the concessional interest rate has put downward pressure on interest rates and resulted in improved commercial lending arrangements.
4.14
In addition, the committee heard evidence that the RIC loans not only help eligible farm and small businesses improve their long-term strength, resilience and profitability, but may also result in increased cash flow for 'local suppliers, retailers and other associated businesses and services and supports stable and ongoing employment in rural and regional areas'.
4.15
The RIC noted that 'due to the infancy of the RIC and its concessional loans program, assessment of its performance and the ultimate impact or success of the loans is yet to be determined'. The NFF recommended that the suite of RIC loans be reviewed for uptake and effectiveness.
4.16
In addition, several inquiry participants identified a number of areas for improvement. These views are discussed below.
Administrative burden
4.17
Some submitters stated that current application processes are unclear and complex. These inquiry participants criticised the considerable administrative burden on people attempting to access the loans and called for this process to be simplified.
4.18
Mr McKeon explained that while many growers have successfully accessed concessional loans through the RIC, a large number have expressed frustration with the application process. Mr Zachary Whale, General Manager, Policy and Advocacy, GrainGrowers, echoed these concerns and called for application processes to be simplified and processing time to be reduced.
4.19
Similarly, the NFF argued that application processes be expedited and communication regarding products be improved.
Timeliness
4.20
Submitters also expressed concern about the amount of time to assess applications and process loans.
4.21
Ms Carla Jago, Group Executive Director, Performance Audit Services Group, Australian National Audit Office, told the committee that loans approved in the second quarter of 2019–20 took an average of 184 days from application to settlement:
At that point, it was taking 29 days from submission to when it was deemed to be complete—that is, when all mandatory information had been received. It then took 15 days for the assessment—that is, for the external service provider to actually assess the application and provide a recommendation to RIC. It took another 54 days for RIC to make their final decision, and then 68 days from the time of their final decision to the disbursement of loan funds for those that were approved.
4.22
In response to this evidence, Mr Bruce King, Chief Executive Officer, RIC, described the settlement process:
The settlement phase is a much more complex phase, and I think the ANAO actually referred to it as a separate phase, because we have to work in conjunction with the customers and their banks to secure deeds of priority and then have the banks acknowledge and accept the settlement of our loans.
4.23
Mr McKeon explained that delays are particularly problematic for growers 'who [have] certain windows of operation when they need to get the crop in the ground'.
4.24
In addition, the TFGA identified a need for long-term support as '2 years of interest free payments may not be enough to support producers in extended droughts'. The committee repeatedly heard that there is a need for long-term support. This evidence is discussed further below and, in relation to support for the wider drought-affected community, in the following chapter.
Restrictive eligibility
4.25
Some inquiry participants raised concern that people needing support were ineligible due to restrictive eligibility criteria. For example, the Australian Meat Industry Council (AMIC) explained that current eligibility criteria exclude businesses further down the agriculture supply chain, such as meat, grain and fibre processes and 'do not recognise the post-farmgate sector that are directly reliant on farm livestock outputs'. This is of particular concern given the fact that these processors are heavily reliant on the livestock output of farm businesses.
4.26
The AMIC recommended that eligibility criteria for the RIC loans be revised to include 'those businesses that provide services, relating to primary production, for farm businesses, or are directly reliant upon farm agricultural outputs (e.g. livestock)'.
4.27
When asked whether there was scope for the RIC to expand its eligibility criteria to include businesses further down the agriculture supply chain, Ms Rachel Connell, First Assistant Secretary, Water Division, Department of Agriculture, Water and the Environment (the Department), explained the AgBiz Drought Loans 'are designed to provide loans to businesses that supply the agriculture industry, rather than the next step along; the other side of the supply chain'.
4.28
Ms Connell observed that such an expansion to eligibility criteria would open up the AgBiz Drought loans to 'a very broad number of businesses':
There's a significant number of businesses that could potentially be captured if that eligibility were extended, so a significant amount of work would have to go into making sure there would be enough loan funding available.
Farm Management Deposits Scheme
4.29
The committee heard that there are a range of taxation measures to help drought-affected primary producers, including immediate tax deductions for capital expenditure and the FMDS. The FMDS, introduced in 1999 and expanded in 2016, assists primary producers to deal more effectively with fluctuations in cash flows. Under the FMDS, eligible farmers can set aside pre-tax income to draw on in future years when needed, such as for restocking or replanting when conditions improve.
4.30
The National Drought and North Queensland Flood Response and Recovery Agency (NDNQFRRA) explained that the policy intent of the FMDS is to help primary producers immediately deduct (rather than depreciate over three years) the cost of fodder storage assets, such as silos and hay sheds used to store grain and other animal feed, making it easier for them to invest in and stockpile fodder.
4.31
The Australian Taxation Office noted that the balances held in farm management deposit accounts have steadily increased over the past decade. Statistics published by the Department revealed that, as at April 2021, the total holdings in the FMDS were $5.26 billion, held in over 44 000 farm management deposit accounts (compared with $4.14 billion held across 45 710 accounts in June 2014).
4.32
A GrainGrowers survey, with over 700 respondents, showed that where account holders had made withdrawals, these deposits were primarily used for operational and capital improvements, ongoing drought operational costs and post-drought mitigation activities (for further information, see Figure 4.1).
4.33
Of the 20 per cent of survey respondents who indicated that they did not hold an FMDS account, a lack of information on the benefits and operation of the FMDS was highlighted as a barrier to uptake.
Ineligible business structures
4.34
Another key criticism related to ineligible business structures, with some submitters arguing that the current eligibility criteria excluded people who ought to have access to the FMDS.
4.35
In a submission to the Department's evaluation of the FMDS, GrainGrowers reported that for a large number of growers 'business structure is impeding upon their ability to access and engage with the Scheme'. It noted that 'the current arrangements forgo consideration that the activities of farming are the responsibility of the individual rather than that of the business entity'.
4.36
Similarly, Mr Ash Salardini, Chief Economist, NFF, pointed out that '[e]ligibility around off-farm income or the definition of a primary production business might actually rule people out of that measure, despite the fact that they're very much farmers and farm businesses'.
4.37
Submitters called for adjustment to the FMDS 'to ensure it reflects the realities of farming practices'. For GrainGrowers, this included expanding eligibility to encompass all farming businesses and reviewing income eligibility for non‑primary production. It contended that this would improve uptake and the effectiveness of FMDS as a risk management tool.
4.38
Despite concerns regarding the exclusion of certain business structures, Ms Kerren Crosthwaite, First Assistant Secretary, Drought and Bushfire Response Division, the Department, advised that the scope of the Department's current evaluation of the FMDS 'did not actually include the question of whether eligibility should be extended beyond sole traders and partnerships'.
Instant asset write-off
4.39
The instant asset write-off is another taxation incentive available to eligible farming businesses. The NSW Irrigators' Council explained that this provides capacity for farmers to invest in drought-proofing infrastructure and reduce their tax burden in times when they need it most. It argued that this incentive should be adopted as a permanent measure for drought-proofing.
Environmental stewardship
4.40
A common theme brought up by inquiry participants was the role of farmers and other landholders in protecting and managing Australia's natural resources. The committee heard that there is a need for farmers to be recognised and supported in their environmental stewardship role. The NFF told the committee that 'Australian farmers are environmental stewards, owning, managing and caring for 51 per cent of Australia’s land mass'. Similarly, the NSW Irrigators' Council argued that '[i]rrigation farmers are stewards of tremendous local, operational and practical knowledge in water management'. It submitted that there are 'many cases whereby farmers manage valuable ecological assets on their land, and these practices must be supported, particularly in times of water insecurity'.
Agriculture Stewardship Package
4.41
The committee heard that the $34 million Agriculture Stewardship Package (the Package) aims to incentivise the adoption of sustainable practices to deliver farm business improvements and provide biodiversity outcomes to improve the availability and quality of water and vegetation over the agricultural landscape.
4.42
The Red Meat Advisory Council (RMAC) proposed a number of potential improvements to the Package which it argued would keep land managers on the land, have environmental benefits and reduce the burden of restocking and rebuilding following periods of drought. This included expanding the Package to include stewardship payments for landholders in the form of an ongoing wage to those impacted by drought and conditional on meeting certain activity requirements, such as the management of pest and weed species or the regeneration or management of the landscape for resilience. Alternatively, it proposed a stewardship security levy in the form of 'a small payment taxed on customers that is used for the purposes of maintaining Australia's resource base through drought'.
Information and advice
4.43
The committee heard that there are several sources of information regarding Australian drought support. These include:
FarmHub: a centralised source of information on support and programs from all levels of government, industry groups and not-for-profit organisations.
National Drought Map: an online tool that brings together population data, information on drought conditions and programs.
Agency websites: government organisations involved in the delivery of the drought response each have website with factsheets, links, guidelines, and other information about the programs they deliver.
4.44
As noted above, several submitters argued that communication of available drought support lacks consistency and clear information about programs. This is of particular concern given that, as put by the TFGA, '[p]roducers are traditionally time poor and ensuring information is not duplicated and available in a single easily accessible location is paramount'.
4.45
While submitters recognised the importance of these centralised information management tools, many raised concerns about accessibility, localised data, consistent messaging and drought indicators. Others called for constant communication, not only during drought events, but also in times without drought. This evidence is discussed below.
Accessibility
4.46
The TFGA noted that the National Drought Map is 'an important tool for producers, industry and government to understand drought in their region and beyond'. However, it commented that 'to be truly effective and informative producers need to be aware of them, how to navigate the sites and the information on them'.
4.47
The TFGA raised similar concerns in relation to FarmHub. It submitted that unified messaging and centralised information is 'very helpful for producers to understand what support is available'. However, there is a need to ensure that producers are aware of the website and understand how to access and navigate FarmHub. To this end, the TFGA recommended further investment in communication campaigns targeted at producers to provide information on financial assistance and resources available.
Data
4.48
The RMAC argued that, despite creation of the National Drought Map, 'there is still no comprehensive, easily accessible data on the extent of drought across the country'. It argued that without this data, drought policy and interventions are based on assumptions.
4.49
The RMAC also advised that one 'key area to improve understanding to prepare for and manage droughts is weather predictions'.
Drought indicators
4.50
The committee received evidence that there exists a need to develop a consistent suite of drought indicators to better understand the impacts of emergent drought conditions and work more proactively.
4.51
The Coordinator-General for Drought's report noted the complexity in developing drought indicators. Nonetheless, it concluded that the Australian Government should develop two sets of indicators (one for internal use and another to inform stakeholders) to better understand changing conditions and emerging impacts.
4.52
During the course of its review of the Australian Government drought response, the NDNQFRRA concluded that '[i]n the absence of agreed indicators … determining eligibility criteria remains a challenge'. Similarly, the Australian Government's first annual review of the National Drought Agreement found that '[w]hile complicated, there would be benefit in working towards greater inter-jurisdictional consistency in the criteria to define drought and inform government intervention on drought assistance'.
4.53
Inquiry participants raised concern that, in the absence of agreed drought indicators, determining eligibility for in-drought support remains a challenge. For example, the TFGA echoed the Coordinator-General for Drought's recommendation. In its opinion, drought indicators are 'vital to understanding and managing drought'.
4.54
Furthermore, to be used effectively by primary producers, the TFGA argued that indicators must be applicable and accessible as a management tool. To this end, it called for ongoing collaboration between Australian, state and territory governments and industry to ensure consistent messaging.
4.55
For the East Gippsland Shire Council, drought indicators should:
be appropriately scaled to ensure that local variations are recognised;
monitor the transition into drought conditions as well as the recovery process; and
recognise the cumulative impact of drought as a changing climate impacts on the frequency and intensity of droughts.
4.56
Ms Hannah Wandel OAM, Executive Director, Drought, National Recovery and Resilience Agency, advised that work is presently underway in line with the Coordinator-General for Drought's recommendation. She explained that this includes working with the Nous Group to develop drought indicators in order to better identify when areas are going into, and coming out of, drought.
4.57
The committee notes that the Australian Bureau of Agricultural and Resource Economics (ABARES) has recently undertaken work to estimate the vulnerability of broadacre farms to drought. This study considered the definition and measurement of drought and developed a new outcome-based drought indicator which determines whether a given broadacre farm is in drought or not at a given point in time, based on the modelled effect of seasonal conditions on farm profits. According to the NDNQFRRA, this will go some way to support the development of a framework for drought indicators that can be used as a consistent decision-making tool.
4.58
The ABARES noted that while these drought indicators offer greater accuracy, careful consideration needs to be given to how they would be applied and communicated in practices. In addition, they offer assessments of drought for a specific context (Australian broadacre farms) and may not accurately reflect drought impacts in other farming sectors or the wider community.
Related issues
4.59
In addition to the evidence received in relation to specific drought assistance measures for farmers and farm businesses, the committee has also received general evidence on related issues. This evidence is discussed below.
Increased, long-term support
4.60
Several inquiry participants called on the Australian Government to provide long-term program investment and support at the strategic level for farmers and farm businesses. For example, the TFGA argued that 'the issue of financial support for farmers in extended droughts or post drought periods is unclear'. To this end, it proposed the development of a long-term support strategy for producers.
4.61
Similarly, GrainGrowers was of the view that the Australian Government should provide a safety net for farmers. However, it cautioned that drought support should not foster market distortions or promote poor business operating practices.
4.62
The committee received evidence that there is a need to increase the overall level of support for farmers with GrainGrowers, among others, concerned that 'Australian agriculture receives the lowest for any developed nation on earth'. It explained that between 2000 and 2018, Australian farmers received an average of 3 per cent of their gross farm income as support, compared with 15 per cent in Canada, 12 per cent in the United States of America and 25 per cent across Europe.
Post-farmgate support
4.63
As noted above, some of the criticism levelled at current drought support by industry participants related to restrictive eligibility criteria that exclude post‑farmgate businesses, such as handlers, processors, manufacturers and exporters. For the RMAC, this is of particular concern given that 'drought impacts are felt equally in post-farm gate industries'.
4.64
The AMIC submitted that this issue cut across various programs, including water infrastructure funding (discussed further in Chapter 7), drought assistance loans and other financial support:
[T]he government’s current drought assistance measures fail to adopt a whole of supply chain approach, and the current government policy setting actually creates pain-points along the supply chain, which fundamentally results in policy inconsistency and reductions in farm-gate returns.
4.65
Both the RMAC and the AMIC argued that the Australian Government's drought response should be revaluated and redefined to ensure that the intent of drought assistance is consistently maintained throughout the supply chain.
Market access
4.66
For the AMIC, drought preparedness needs to focus on 'ensuring that producers can get the best possible prices for their stock'. It argued that by increasing funding for the Department, 'they [would be] able to effectively maintain and grow export opportunities for Australian producers, through effective negotiations to reduce technical barriers to trade'.
New entrants
4.67
Another issue related to the impediments faced by new entrants into farming and a lack of support for these 'most vulnerable farming enterprises'. Mr Whale argued that 'new entrants often face greater impediments in implementing preparedness and resilience measures compared to more established businesses'. GrainGrowers called on the Australian Government to recognise the critical role of new entrants in ensuring a strong and enduring agricultural sector.
Support for small businesses
4.68
Some submitters expressed concern that the Australian Government's drought response does not adequately support small businesses. The ALGA reported that councils were generally of the view that '[t]he government’s focus is too much on farmers and not enough on small business. Small business is not in the picture at all'. The ALGA argued that, for example, the AgBiz Drought Loan, announced in November 2019, 'has come too late for many farm‑dependent businesses'.
Committee view
4.69
Australian farmers are driving the success of our nation's agriculture sector, with the value of production in 2019–20 reaching $66 billion. This success is thanks in large part to the resilience, innovation and hard work of farming families and their communities.
4.70
However, drought has a significant impact on the productivity and profitability of farms. Famers have lost revenue, reduced their stock and struggled to put food on the table, while others have left their home towns to search for work.
4.71
Until farmers in affected regions receive consistent rain and their soil moisture improves, they will not be in a strong position to recover. As a result, it is critical that drought-affected farmers and farm-related businesses have access to financial support to aid drought preparedness, management and recovery.
Unclear communication
4.72
The committee notes evidence that communication about drought support measures and how to access them is unclear and impacts individuals' ability to access appropriate support. Of particular concern is the evidence that there is insufficient information available about programs, such as program objectives, eligibility and how to access funding.
4.73
To enable sound decision-making, individuals need clarity about what support is available to them and how to access it. There is a strong need for more targeted information on the broad range of support available that details available assistance in plain English.
4.74
The committee notes that the numerous online sources of information regarding Australian Government drought support increases the likelihood of mixed messaging. Therefore, it is critical that the Australian Government consolidate online information and strengthen online tools.
4.75
The committee understands that the National Response and Recovery Agency employs a number of Regional Recovery Officers who provide face-to-face communication with drought-affected farmers and communities regarding government assistance and information. The committee welcomes this initiative and recommends that the Australian Government continues to fund on-ground government officials to communicate the range of drought support available, listen to those it targets to understand the challenges and hesitations of taking up that support and relay feedback to inform program design.
4.76
The committee recommends that the Australian Government communicate key information about drought support measures, and how to access them, in plain English.
4.77
The committee recommends that the Australian Government consolidate online information and strengthens online tools, such as the National Drought Map.
4.78
The committee recommends that the Australian Government consult and communicate closely with recipients of drought funding in the design and delivery of all its drought support projects.
Rigid and complex eligibility
4.79
While the committee acknowledges the need for robust eligibility to ensure support is targeted, some programs, such as the RIC loans and FMDS, have rigid requirements that can limit the impact for those most in need.
4.80
The committee notes the evidence that eligibility for drought programs has caused ineffective and sometimes unfairly targeted outcomes. A number of submitters called for a range of funding measures to be made available to businesses further down the agriculture supply chain, such as meat, grain and fibre processes.
4.81
The committee recommends that the Australian Government develop guiding principles for determining program eligibility for drought support programs.
4.82
The committee recommends that the Australian Government recognise the impact of drought on post-farmgate sectors and assess whether drought assistance is delivered throughout the supply chain.
Burden of application processes
4.83
The effectiveness of drought support is dependent on whether people in need can access funding. Reducing complexity is increasingly important at times when those eligible are subject to family and economic pressures and a potential reluctance to ask for assistance.
4.84
The committee received evidence that, for a range of reasons, drought assistance is not accessible. Submitters raised concern that the application process required to access funding across a number of different programs, such as the FHA and RIC loans, is complex and that the administrative burden on applicants is considerable.
4.85
Given the constant calls from farmers and businesses for support, the committee is concerned about the burden of application processes. This situation is particularly alarming as applicants are often time-poor and experiencing financial and emotional distress due to drought. We therefore recommend that the Australian Government streamline the administrative processes for obtaining drought assistance to reduce the burden on those seeking to access assistance.
4.86
One promising option is the establishment of a centralised information management tool that uses existing information held by government agencies to prepopulate program application forms to simplify drought support for individuals and reduce the repetitive nature of information provision.
4.87
The committee recommends that the Australian Government revise, simplify and streamline application processes for drought support where possible. This should include prepopulating applications with information already held by government agencies.
Information and advice
4.88
Accurate and accessible information is vital to decision-making—not only for governments, but also for farmers and communities. The committee is concerned that information from the government is not always being communicated in a clear and timely manner.
4.89
The overwhelming evidence supports the development of drought indicators. While the committee acknowledges that is a challenging exercise, it is clear that indicators would provide a useful picture of emerging conditions, trends and patterns and assist governments, communities and farmers to better prepare for and respond to drought.
4.90
The committee welcomes the Australian Government's efforts so far to develop drought indicators. However, there is more to be done. The drought indicators developed by ABARES are complex and careful consideration needs to be given to how they would be applied and communicated in practice to ensure they are useful and trusted. Importantly, the usefulness of drought indicators is dependent on the ability of governments, communities and farmers to access and apply them.
4.91
To this end, the committee supports the development of a framework for drought indicators that can be used as a consistent decision-making tool, as agreed by the Agriculture Minister's Working Group on Drought at its inaugural meeting on 6 February 2020.
4.92
The committee recommends that the Australian Government, in conjunction with state and territory governments, develop an agreed set of drought indicators to be applied consistently in program design for in-drought measures.
4.93
Furthermore, the committee is of the view that the Australian Government should establish a clear framework ahead of time and based on drought indicators, to guide when, and if, the government should intervene with in‑drought funding support beyond the support that is available at all times. This would ensure that support is always available when it is needed most.
4.94
The committee recommends that the Australian Government establish a clear framework ahead of time and based on drought indicators, to guide when, and if, the government should intervene with in-drought funding support beyond the support that is available at all times.