915 research outputs found
Income Contingent Loans for Drought Relief: Delivering better outcomes for farmers and taxpayers
No full textAustralia’s National Drought Policy is considered to be one of the most advanced in the world, recognising as it does the reality of climate and focusing on adapting farm management to climatic uncertainty rather than simply subsidising agriculture in low rainfall areas. But while the underlying principles of the Policy seem to be sound, after nearly two decades of implementation and incremental changes to the instruments applied under the policy have resulted in the loss of the risk management message, ongoing use of the exceptional circumstances provisions and growing inequities between farmers, and between farmers and non-farmers. In this paper we argue that the objectives of the Policy need to be reaffirmed and key policy changes made to ensure the outcomes of the policy more closely align with its intentions. We analyse financing policy issues and propose the introduction of an income contingent loan (ICL) for drought relief as an equitable and efficient policy instrument for delivering relief to farm businesses experiencing drought, and perhaps for other adverse circumstances. It is argued that such a policy reform would allow farm businesses to take advantage of ICL insurance benefits associated with default protection and income smoothing, while at the same time minimising taxpayer contributions to drought relief.drought relief; income contingent loans; rural policy
Developing Equtiable and Affordable Government Responses to Drought in Australia
No full textOnce again in 2002 Australian taxpayers are being called on to provide relief to drought-affected farmers. Under the National Drought Policy which has been in place since 1992, support is provided by the Commonwealth Government predominantly in two forms: interest rate subsidies to assist farm businesses and a special welfare payment, the Exceptional Circumstances Relief Payment. Support is available under these programs only to farmers in geographically defined areas which have been declared to be experiencing 'exceptional circumstances'. This paper describes a number of problems with this approach and suggests an alternative form of drought relief based on the Higher Education Contribution Scheme, which is more equitable between farmers, less regressive in its impact on tax payers, and less open to politicisation.
Income Related Loans for Drought Relief
No full textThere is arguably a consensus that the current approach to drought relief is in need of reform and possibly replacement with an improved government financial assistance mechanism. Grants to farmers, in the form of interest rate subsidies, have several difficulties, which in summary are as follows: i. There are typically too few financial resources to be drawn from government to address adequately and equitably the needs of farms in a dire drought situation. ii. The rationing arising from (i) means that access to assistance requires complex eligibility criteria, resulting in application and administrative processes that are complex and thus expensive for both farmers and government. iii. Grants for drought relief are financed by contributions from all taxpayers, and it is very likely to be the case that this is regressive. Average taxpayers will be less wealthy and have fewer other economic advantages than the majority of farmers assisted through drought relief. This paper outlines the potential advantages and challenges associated with the implementation of income related loan arrangements for drought relief as a possible alternative to the existing interest rate subsidy scheme. The conceptual basis of income related loans is explained, and reference is made to the application of policies of this type in other areas of government financial intervention. The paper addresses the administrative challenges associated with such a policy reform, with reference to the idiosyncrasies of agricultural financing. An illustrative example is offered of what an income related loan applied to drought assistance might mean for the time stream of both revenue for the Commonwealth budget and repayment obligations for farms differing by economic size.income related loans, drought policy, agricultural subsidies
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