The cost of drought – and it’s just going to grow


In the 2007-08 financial year alone, more than $1.5 billion was promised in direct assistance to farmers and their surrounding communities. The following year another $1.1 billion was needed.

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All told, the Howard, Rudd, Gillard, Abbott and Turnbull governments earmarked more than $8 billion in direct assistance solely for drought. They stretched from supplying buses carrying Centrelink staff to help with paper work to massive loan programs.

Despite the efforts, the number of people working in agriculture has fallen a quarter since mid-2001. The number of beef, sheep and grain farmers has effectively halved to just 110,000.

The Morrison government has created a Future Drought Fund that will from next year start releasing up to $100 million annually to “enhance” preparations and responses to drought conditions. That’s on top of $1 billion in extra concessional loans for farmers that were announced in last year’s mid-year budget update.

None of the spending includes major infrastructure works such as the Howard government’s $10 billion Murray-Darling program or the recently announced $1 billion in loans to expand dams in NSW.

Farm management deposits, which help farmers defer tax payments so as to deal with natural disasters such as drought, have cost the budget $2.5 billion in foregone revenue since the millennium drought.

On top of the direct budget costs, the drought will have an economic impact. The most recent consumer price index showed lamb prices up 14 per cent over the past year while cereal and milk prices have also climbed by up to 3 times the general inflation rate.

Prime Minister Scott Morrison on a recent visit to a drought-affected property near Dalby in Queensland. He has promised another drought package in coming weeks.Credit:AAP

The Commonwealth Bank estimates the current drought could cut GDP by between 0.5 per cent and 0.75 per cent, or between $9.5 billion and $14 billion. Much of that will be borne by rural communities.

Wayne Dunford has been farming near Parkes in western NSW for the past 50 years. He said the decision to stay or go was becoming a week-to-week proposition for many farmers.

“It’s decision making time,” he said. “It’s not only farmers themselves but the towns are really starting to feel the pinch. The shearing teams in Walgett have no work because there’s no sheep to shear.”

There were 111 million sheep across the country in mid-2001. By 2009 the flock had shrunk to a little over 68 million with numbers edging down since then to 67.5 million.

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People are also disappearing. Almost 10 per cent of Walgett’s population has left town since 2012, Australian Bureau of Statistics figures show. Seven percent have left Condobolin near Parkes while 4.5 per cent have departed from Coonabarabran in New England.

Mr Dunford said one small community outside of Parkes lost 20 kids out of school in the past year because parents have left town. They will probably lose a teacher.

“It just keeps compounding in the areas that are in their third year of drought,” said Mr Dunford.

Mr Dunford, the chair of the NSW Farmers drought task force, said government funding had helped the local council put on a dedicated local drought coordinator to let families know what assistance they could access at both state and federal level.

“But his funding ran out in June. To get something like that in place and then have the rug pulled after 6 months is pretty disappointing,” he said.

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The UNESCO chair of water economics at the Australian National University, Quentin Grafton, said with so much money being spent over the years on drought some of it had been wasted.

Welfare assistance direct to farmers made sense, especially to alleviate the financial pain they faced, but bigger programs that were couched as “business” or community support were harder to justify.

Professor Grafton said large exit packages should be offered to farmers prepared to walk away from their properties, with covenants placed over that land to ensure it was not over-worked by new owners.

“By and large these sort of large exit packages aren’t a bad strategy. They may take some marginal land out of production or bring in people better able to deal with that land,” he said.

But Professor Grafton warned the government’s push to build new dams would only add to the problems facing rural and regional communities in future droughts.

He likened dams to new roads built to deal with increased traffic congestion. The new road quickly draws traffic from other areas and encourages more people to drive, causing the congestion that was supposed to be resolved.

Burrendong Dam, which supplies water to major NSW communities including Dubbo, is at 4% capacity. There are warnings expanding dams may add to problems in the next drought.

Burrendong Dam, which supplies water to major NSW communities including Dubbo, is at 4% capacity. There are warnings expanding dams may add to problems in the next drought.Credit:Wolter Peeters

Any benefit from a short-term increase in supply would be lost as demand from irrigators would increase, leaving rural communities facing the same problems when the next drought occurred.

“Building these dams will do nothing to deal with the drought in the short term and will actually make the situation worse in future droughts,” he said.

“Just throwing on the money doesn’t solve the problem and it could make the situation worse. We could easily have some large unintended consequences.”

Andrew Rolfe is a seventh generation farmer. Sheep now roam the parched property near Cooma in southern NSW after a little early rain in autumn was followed by hot dry winds through a parched winter.

The Rolfes were the first European settlers in an area that was home to Indigenous Australians for thousands of years. Cooma has lost 1 per cent of its population since 2012, but more could follow if the rain doesn’t come to replenish a landscape that once thrived in the run-off from the Snowy Mountains.

“There is a bit of pressure to hang onto this thing if we can get through this next little bit,” he said.

Mr Rolfe said he would run out of a $40,000 freight subsidy this week but farmers had been more proactive than in previous droughts, building containment lots and selling what they can.

“I’m only 31 and I’ve been through a few droughts in my lifetime already. It’s still tough financially and emotionally but because we are proactive we know it is inevitable,” he said.

Andrew Rolfe, a farmer from Cooma, says he isn't looking for handouts from government.

Andrew Rolfe, a farmer from Cooma, says he isn’t looking for handouts from government.Credit:Alex Ellinghausen

“We are not looking for handouts or anything like that. There is a lot more positivity around.”

Respected economist Saul Eslake said with droughts seemingly occurring more often this century than through the 20th century, policy prescriptions will have to change.

“From a longer-term perspective, it seems droughts are occurring more often than in the 20th century.

“It could well be that farming, at least as conventionally practised, may no longer be sustainable in more drought-prevalent parts of the country,” he said.

“If that’s a correct assumption, Australian drought-relief policies need to contemplate the possibility of some communities needing assistance to transition out of farming operations in the long term.”

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