NSW Farmers president, columnist discuss drought relief

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Australian Broadcasting Corporation

Broadcast: 03/10/2007

Reporter: Tony Jones

NSW Farmers Association president Jock Laurie and Financial Review columnist Brian Toohey discuss the proposed drought relief overhaul.


TONY JONES: Now returning to our top story - the push by the National Farmers Federation to get more farmers to match government efforts to drought-proof their properties.

The move comes as Labor's call for a national audit of all of Australia's farm lands has received backing from Peter Cullen, Australia's leading expert on water issues and a member of the influential Wentworth Group.

Well, two people with a very different perspective on the issue of the viability of farming in marginal areas of Australia are Jock Laurie, president of the NSW Farmers Association, and the national affairs commentator and Financial Review columnist, Brian Toohey. Thanks to both of you for joining us.

TONY JONES: Brian Toohey, we'll start with you. You set the cat among the pigeons last week by saying that government handouts to struggling farmers are postponing the inevitable. You've become an economic rationalist in your old age, have you?

BRIAN TOOHEY: No, I also believe in this case that welfare dependency's not a good thing. It does farmers - it's not compassionate, it does farmers no good at all to subsidise them to stay on farms which aren't going to be viable, it just puts enormous stress on those people, and they'd be better off doing something else, which... Farmers are very competent people, they've got a wide range of skills and as we've moved closer - very close - to full employment, it's not such a hard thing to say that they would be better off with without a lot of debt around their neck.

TONY JONES: But which farmers are you actually talking about, and how do you assess what actually is a marginal farm?

BRIAN TOOHEY: Well, you'd assess it fairly quickly if you stopped paying them drought relief for seven years in a row, they'd discover it was fairly marginal land. I agree that picking particular farms as being non-viable, you don't want bureaucrats doing that. But you can -

TONY JONES: Who else would do it? Surely, not a Financial Review columnist?

BRIAN TOOHEY: No, no, no - of course not. But, I mean, people zone land throughout Australia. Governments zone land for housings, you're not supposed to build on a swamp and so forth. Some deserts, I think, are off limits to farmers, it's quite sensible, I think, to say that some areas, where the long-term pattern of rainfall suggests it's not going to be viable to keep farming, you say you can't get drought assistance if you insist on farming in that area.

TONY JONES: And are you implying by this that it's only for historical or sentimental or even political reasons that farmers do currently get the drought relief they get?

BRIAN TOOHEY: Well, I mean, they get much different level of assistance than other small businesses. Small businesses go broke every day of the week in this country. People who put a lot of capital into some small businesses, a lot of effort, and there's a lot of heartbreak when they go broke, but no-one's suggesting they get year after year of assistance, not just in terms of the equivalent of unemployment benefits, getting some help to keep money on the table, they get interest rate subsidies - farmers do - they're encouraged to put money into a deposit scheme which is tax advantaged, and that was supposed to be drawn down during the drought. Well, it's nearly at record levels, nearly $2.8 billion.

They've got over - well over $3 billion in drought assistance. No other small businesses get this sort of stuff. And I'm not suggesting that farmers need to be punished or anything like that at all. It's just not good for them nor is it good for the country to keep them on land that's not going to be viable.

TONY JONES: Jock Laurie, there you hear it laid out, it's not good for you, it's not good for farmers to be on marginal land, struggling year after year in drought conditions that may actually get worse because of permanent climate change. What do you say? Are farmers actually different to other small struggling business?

JOCK LAURIE: Look, I think a lot of farmers out there without any doubt in order to get assistance from the Government have got to prove their viability to begin with. So we're in a situation where it's not a handout to anyone, anywhere, any time. They need to be able to prove they're viable, they need to be able to prove long-term, they're viable in order to gain some of the assistance, especially the interest rate subsidies.

TONY JONES: How do they do that? How do you actually prove, after many years of drought and you're still not making a profit, that you are viable?

JOCK LAURIE: Well, I mean, it goes through a process and obviously that process involves your bankers to make sure that they're actually prepared to support you. It then goes down to the rural assistance authority, and they make a judgment on the paperwork that you've submitted, and we've had people ringing us up and saying that they have been told that they're not viable and so therefore would not be getting any assistance. So the view that any money going to viable farmers, I think, would certainly be questioned in many areas.

TONY JONES: Peter Cullen from the Wentworth Group says the Government's now spending about $25 million a week on drought assistance for 15,000 to 20,000 farmers in the worst hit areas, the ones that are doing it tough. But most of it, he says, goes straight to the banks. Is he actually right about that?

JOCK LAURIE: Look, I think most of it actually goes back into the communities. And one of the arguments we're having here is that while there's certainly money going back in through agriculture, that money definitely goes straight back into the local businesses and the local communities. So in a lot of ways money poured in through the agricultural sector is keeping and maintaining a lot of the communities out there, making sure that we keep a lot of the basics in relation to teachers and doctors and all those sorts of things. Those communities breaking down would have a devastating impact on some of those areas out there, so it's really important that we make sure they survive and the towns that are reliant on agriculture are of course pouring money in the top as they say, come outs and filters straight through to the communities.

TONY JONES: Brian Toohey, what are you saying here? I mean, is your point that market forces should be allowed to simply be applied to drought-stricken areas and simply wipe away whole communities?

BRIAN TOOHEY: You can't stop change occurring throughout - I mean, some towns have grown a lot bigger over the years in Australia and some have grown a lot smaller. You can't say that something should be, you now, set forever in concrete. I mean, there's a big problem with farming in Australia - for most part, for most farmers, it's not very profitable. According to the figures from ABARE, the Australian Bureau of Agriculture and Resource Economics, the return on capital for broad acre farms since the 1970s has been 1 per cent a year. That's a terrible business to be in. And, really, people should not be kept in bad businesses with government subsidies.

TONY JONES: Well, Jock Laurie, I'll get you to reply to that before I move on the NFF's initiative.

JOCK LAURIE: Look, I think the fact is that we do change. We do adapt and we have been adapting for a hell of a long time. We adapt to the climates that are put in front of us, we adapt to the markets; we adapt to absolutely everything. We've got communities that certainly aren't the strength that they were years ago, and we've got communities that have developed into great communities out there. So we're in a business where we understand we've got to adapt. We're using some of the best new technology available. There's an enormous amount of R and D (research and development) being done to make sure that we're at the forefront of world agriculture so to speak. So to continually hear that we're only making very small returns on our capital and all these things, and we shouldn't be there is, as far as we're concerned, a load of rubbish.

We love the industry, we're very, very happy at the standard of living that we've got in most places, but you can't be a situation where you've got a drought for seven years and then turn around and expect the entire industry, and many parts of it right across Australia, to continue to be able to survive without some sort of assistance and commitment from the Government, and commitment from the community of Australia.

TONY JONES: Okay, but is there a point where the Government needs to turn off the tap? Is it 10 years, is it 15 years? Is it twice the length of the current drought? At what point do you think the Government would have to rethink what it's doing?

JOCK LAURIE: Look, obviously those discussions are going on regularly with government departments and everybody. I mean, it's where we should be going from here. It's a very, very difficult issue. This drought, historically, is certainly going on longer than it has done previously, and I think if we go back to records about a 100 years we can see the last time that we had rainfall records in many part of Australia like this. So it is something that is very difficult. But the industry itself, to turn around and have two failed wheat crops, and I've been out to a lot of that country today, to have people to have two failed wheat crops in a row is unprecedented. A really difficult situation. We have got enormous numbers of families out there that are in problem. We've got industries in the intensive area, for instance, that require grain to feed - whether that be pork, chicken meat, egg, dairy, for instance - are all under extreme pressure. The question is what part does agriculture have to play in the Australian community? We believe a very big part and we believe that the product, the dollar, that comes into agriculture in our pocket, by the time it filters right back through the community, there are an enormous number of people who hang off that.

TONY JONES: Okay. The dollar in your pocket, at least some of them are going have to go to match, if the NFF gets its way, to match government dollars for drought proofing initiatives. Do you accept this mutual obligation approach the NFF has come up with today?

JOCK LAURIE: Well, the NFF are looking at going to the election and putting some facts on the table. And one of the things that they've been discussing for a long period of time now is that the industry itself is more than prepared to go out and get into a situation where we are prepared for droughts. Now people will take that opportunity to do that. We're asking the Government to come in and help turn this situation around. But obviously we can't do it halfway through this drought.

We've got to get out of this drought, we've got to get into a situation where people can then have money and a bit of flexibility to be able to prepare for droughts in the future. And this is where NFF are heading and I think it's showing quite clearly the industry is more than prepared to stand on its own two feet. Quite frankly, it doesn't want money now. All it want is rain. That's all we want. We just want to get back to be able to do what we do best, and that is producing tucker to generate income to keep our communities going, and that's what we want. The support from the community has been fantastic, but really what we want is rain just so that we can get on with our job.

TONY JONES: Okay. Let's go to the hard-headed Brian Toohey. Leave welfare payments out of this because no-one's talking about taking away welfare payment. But has the NFF done enough, do you think, to in a way blunt the debate about whether farmers themselves are doing enough to drought-proof their own property?

BRIAN TOOHEY: Well, if you believed the mutual obligation, then farmers... when the drought breaks, if it does, and they get some good crops, they should pay back the money that they've got from the government. I mean, students that go to university have a HECS scheme they have to pay back on a loan basis, fees for going to university.

TONY JONES: Don't they pay it back by feeding the country?

BRIAN TOOHEY: Many of the scientists and so forth who helped develop productivity in the rural sector do pay it back through the productivity, but nonetheless we still say, look, part of that's a personal benefit to you, and you've got to pay back some of that money. I don't see any problem with farmers who've been given large amounts of money in drought assistance should not, if they're right and their farm is viable and they have a whole lot of good seasons, why shouldn't they pay back the money they got during the bad seasons?

TONY JONES: A quick response to that from Jock Laurie.

JOCK LAURIE: Look, there have been plenty of issues and I know we've been to the Government on numerous occasions talking about HECS schemes and all those sorts of things. The industry does want to be in a situation where they're prepared to accept the responsibilities there. There have been these discussions before. I mean, our job is to go out and represent the industry. We do that as strongly as we possibly can. Governments make decisions, we don't make decisions. But we've got to pursue governments and let them know, as far as we're concerned, the importance of agriculture, the schemes in different sorts of system that we are prepared or we think that the should have a look at, and certainly a lot of those schemes have been - we have spoken to the Government about those schemes.

TONY JONES: Are you worried that what maybe a foot here is permanent climate change that will require quite radical solutions, and one of them has been put forward, at least the first stage of it, you imagine, by the Labor Party's Peter Garrett last week, and that is of a national audit of farmland to work out what's going to be viable into the future and what isn't?

JOCK LAURIE: Look, I think we need to sit down and let commercial pressures basically dictate what is viable and what isn't viable. As I've said before, a lot of people who are now considered not viable are not getting a lot of the assistance, interest rates subsidy assistance, so those people may not be in agriculture for too much longer. Then if we get in a situation where there is permanent climate change - and we do have some marked changes in rainfall in many areas - then it will obviously dictate what can and can't be done that on that land. If it is currently cropping country, it may have to move into grazing country, it may have to move to very large stocking rates of grazing country. It may have to move into anything.

But one of the things that agriculturists have been good at is being able to adapt to what's presented in front of them, providing seasons stay reasonably consistent. Now, if we get a situation where we actually have got a significant drop-off of rainfall over a period of time and that's going to stay that way, then we need to adapt in order to be able to stay there. Doesn't mean that that land is unviable, it simply means that we've got to make some changes in order to carry on agriculture in those areas

TONY JONES: Do you think any land is unviable? That's currently being farmed?

JOCK LAURIE: Look, we can turn around and take people out. It all depends on what standard of living they want. It all depends on what luxuries they want to live in. I mean, many people are quite happy to go out and in some cases live under a bark hut and live a very simple lifestyle. So as far as they're concerned, yes, that is viable for them. Who makes a determination on what is viable? I don't ask questions of anybody in Sydney about whether they should be living in that house or what they should be doing in that garden or whether that's viable or not viable, it's as simple as that.


BRIAN TOOHEY: If they're running a little cafe and it's going broke and it wasn't viable, then they wouldn't be getting government subsidies. If you want to say the market is going to work, and the market will sort this problem out, you've got to take the subsidies away. Then the market will work out which farms are not viable and which are, but you can't do that while there's subsidies, and even this government scheme at the moment for $150 million put aside to encourage some people to maybe sell their farms, well, nothing much is gained by that if the person that buys the farm two years from now has got his hand out for more drought relief.

TONY JONES: Brian Toohey, I take your analogy - obviously if a cafe went broke, that's not going to affect the nation in the same way as -

BRIAN TOOHEY: What, a single farm going broke?

TONY JONES: Well, the same way as a large cross-section of Australian farms, 15,000 to 20,000 of them, I think we're talking about, receiving relief at the present moment, were to be described as non-viable at some point in the future.

BRIAN TOOHEY: Well, the number of farms in Australia has fallen steeply over the last few decades, the number of farmers I should say, has fallen steeply. The number of people employed in farming has fallen steeply, but that doesn't mean that that's going to affect Australian prosperity at all.

TONY JONES: Jock Laurie, Peter Cullen - taking the idea of stewardship of the land - says that there are large areas of marginal land which should not be farmed, that people should be moved off that land for farming purposes. But he says some of them can actually stay and take care of the land as stewards. What do you think about that idea?

JOCK LAURIE: Look, the stewardship program has been discussed at many levels, certainly at NFF and within our own association. And the basic understanding of a stewardship is that certainly over the last, I suppose, eight or 10 years, there's been some pretty major changes in the way people are managing NRM issues. So delivering good environmental outcomes for the community, the situation is here that if people are asked to deliver good environmental outcome for the community, then put a stewardship program in place that allows them to get on and do that without having to pay for it out of their own pocket. There has been some enormous cost put into -

TONY JONES: Would you accept the Cullen concept, which is people actually stop farming marginal land and just become stewards of it, in other words, stop feral animals and weeds growing, essentially?

JOCK LAURIE: Look, I understand that in some parts there may be people who would be prepared to take up that, providing they're in a situation where there's some sort of return there. I mean, if you're asking people to stop an income earning enterprise and turn around and say that we'll give you a steward, put you in a stewardship program but not make it viable for them, what's the point of that?

I mean, if we're in a situation where you're trying to say to people, 'we want to stop you farming, we're prepared to pay a stewardship program for you to manage that land', then I'm sure in some cases there'd be people to do it, providing that that was well worth it's while.

TONY JONES: A final comment from you, Brian Toohey.

BRIAN TOOHEY: Well, I think we're just back to where we started from, really. There is no point at all and it's certainly not compassionate to keep people on farms where all they're going to do is go heavier into debt and never make a decent living, have their lives full of complete stress and the land will be completely stressed. And there's no gain to the national economy whatsoever out of that.

TONY JONES: Jock Laurie, do you know many people who'd actually welcome the prospect of being bought out effectively by the Government now?

JOCK LAURIE: Look, I think there are people now that have certainly felt the pressures of the drought, there's absolutely no doubt about that. There are people that are verging on the retirement age who may see an opportunity to get out of the game at the moment. There have been people going in and out of agriculture for a very long time. There are a lot of commercial pressures being applied at the moment, they'll continue to be applied. The industry is just having a tough time with rainfall at the moment, and I'm sorry, Brian, but there are many issues we won't agree on and as far as I'm concerned, nobody's got the right to tell anybody else in this democratic society what we can or can't do or what our standard of living should be.

BRIAN TOOHEY: They can tell you you don't get a subsidy if they have to pay for it.

TONY JONES: Okay, that's where we'll have to wrap it up. Brian Toohey and Jock Laurie, thank you both for coming in to join us tonight.

JOCK LAURIE: My pleasure.

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NSW Farmers president, columnist discuss drought relief

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