Bills Digest No. 188 2004–05
Farm Household Support Amendment (Exceptional
Circumstances Relief Payment) Bill
2005
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Farm Household
Support Amendment (Exceptional Circumstances Relief Payment)
Bill 2005
Date
Introduced: 16 June
2005
House: House of Representatives
Portfolio: Department of Agriculture, Fisheries and
Forestry
Commencement:
Sections 1 to 3 of the
Bill and Items 1 and 4 of Schedule
1 commence on Royal Assent. Items 2, 3 and
5 of Schedule I commence on 1 October
2005.
The purpose of the Bill is to
make the legislative amendments to the Farm Household Support
Act 1992 (FHSA) to give effect to some of the measures in the
2005 Drought Assistance Package announced by the Prime Minister on
30 May 2005.
The unprecedented dry conditions over much of eastern and
southern Australia have long ceased to be an issue solely of
interest to rural communities. For example, with water restrictions
now in place in capital cities, as well as other major centres, the
drought is constantly the subject of public comment.
In its latest Drought Statement(1) the Bureau of
Meteorology reports that:
a failure of the autumn rains in southern
Australia (except WA), has resulted in widespread short-term
rainfall
deficiencies over SA, NSW, Victoria and Tasmania. In terms of
state-wide averages dating from 1900, it was the driest autumn on
record in Victoria and SA, the second driest over NSW and the
fourth driest in Tasmania. For the period dating from 1st January,
rainfall deficiencies are also evident over much of southern
Queensland, the south of the NT and central and northern WA.
This most recent period of rainfall deficits is
set against a backdrop of
average to below average falls since the severe drought of
2002-03. There has been no prolonged period of widespread above
average falls to fully remove rainfall deficiencies. As far as the
Murray-Darling Basin is concerned, Bureau rainfall data indicate
that this region is in the midst of its worst multi-year period of
rainfall deficiencies since the 1940s. Furthermore, the effects of
rainfall deficits have been exacerbated by some of the
highest temperatures on record.
For the 3-month period from March
to May, rainfall deficiencies cover most of SA, Victoria, and
Tasmania, and much of NSW west of the Dividing Range. Lowest on
record falls are widespread over Victoria and the southern fringes
of SA, while large patches are evident in central and far western
NSW.
The failure of this year s autumn rains follows the failure of
rainfall received in 2004 to alleviate the long-term deficiencies
characterising much of southeast Australia in recent years. By the
end of 2004 some districts had experienced an unprecedented eight
consecutive years of below average rainfall. In addition, the
all-Australian annual mean temperature for 2004 was 0.45 C above
the 1961-90 long-term average, making it the tenth warmest year
since 1910, when reliable Australia-wide climate records became
available.(2)
Exceptional circumstances are those climatic and other events of
sufficient rarity and severity as to be considered outside the
scope of reasonable and responsible risk management strategies.
Relatively short periods of income decline due to fluctuations in
both seasonal and market conditions are not included as farmers are
expected to have strategies in place to deal with these. This
means, for example, that a drought as defined in meteorological
terms does not automatically qualify for EC.
For a region or industry to be declared eligible for EC
assistance the event must be rare and severe, the effects of the
event must result in a severe downturn in farm income over a
prolonged period and the event must not be a predictable part of
the process of structural adjustment.
EC assistance is the mechanism by which direct, short-term,
financial assistance is provided to farmers for the purposes of
both welfare support to farm households and farm business
assistance. The EC Relief Payment (ECRP) is the welfare component
of EC and equivalent to the Newstart Allowance. EC Interest Rate
Subsidies (ECIRS) is the business assistance element of EC.
EC provisions were first announced in September 1992 as one of
the major changes to the (then) Rural Adjustment Scheme. In 1993 EC
declarations were made in relation to two non-drought events: heavy
rainfall in Southern Australia and the collapse of wool prices.
Since then all EC declarations are believed to have either been for
drought or for a combination of developments with drought being a
major factor.
In February 2000 the Commonwealth Government initiated a review
of drought policy which was formally agreed with the states in
August 2000.(4) It sought to address:
-
concerns about the time taken to reach decisions
-
the perceived difficulties in gathering the necessary data to
support a successful application
-
the scope of Exceptional Circumstances
-
the application and assessment process
-
the use of interest rate subsidies for farm business support
and
-
suggestions that states have lobbied for EC support knowing that
the particular case for support does not meet the criteria.
In October 2003, the Commonwealth Government announced that the
Primary Industries Ministerial Council (PIMC) had endorsed a review
of drought policy.(5) In November 2003, the Drought
Review Panel (the Panel) was established and commenced a
three-month consultation programme.(6) The Panel s
report was presented to the National Drought Roundtable in April
2004.(7)
In May 2004, drought policy reform was then discussed at the
Panel s meeting, when it was agreed that the issues identified at
the Roundtable should be taken into account in developing future
drought policy and support measures. The Panel also agreed to
consider further options in July 2004 and that these options would
be costed to assist in addressing appropriate cost-sharing
arrangements between the states and territories and the
Commonwealth Government.
In July 2004, Minister Truss announced that agriculture
ministers had agreed to a simpler and more responsive approach to
EC by:
i)
removing the requirement for EC applications to establish that a
majority of producers covered by the application have experienced a
severe downturn in income as a result of drought and
ii)
replacing it with an assessment of the impacts on production and a
range of event factors such as rainfall, temperature, soil moisture
and remote sensing information.(8)
With this revised approach, the burden on farmers to provide
State agencies with their income details as part of the EC
application and assessment process would be reduced. For the most
part, EC applications would be assessed using common data that is
more readily available and nationally agreed. These changes were
expected to result in faster access to EC support. Further work on
streamlining EC application and assessment arrangements was
announced in August 2004.(9) Streamlining and speeding
up the EC application process has been a long-standing claim of the
National Farmers Federation.(10)
The main aspects of drought policy considered at the December
2004 meeting of the Primary Industries Ministerial Council (PIMC)
were:
-
progress in addressing issues arising from the Roundtable to
simplify EC processes and shifting the emphasis from business
support during drought towards preparedness for drought and
-
reform of funding arrangements with a proposal by Western
Australia, which includes the joint funding of interest rate
subsidies and funding for business through the provision of
bilateral agreements between the Commonwealth and each state,
referred to Standing Committee for consideration.
2005
A six-point plan to cut through the wrangling over drought
assistance reform at the April meeting PIMC was announced by
Minister Truss on 6 April 2005.(11) His proposed reforms
were:
1. continued 100 per cent Federal
funding of EC income support, including interim income support once
a prima facie case has been established for an EC declaration
2. the cost sharing formula for EC
business support to be 90:10 (Commonwealth: state/territory) in the
first year, and 50:50 in the second and any subsequent year within
a five-year period
3. business support consisting of
interest rate subsidies of up to $100 000 a year (as at
present), or be changed to a grant scheme for drought related and
recovery expenses
4. significant streamlining of the
EC application and assessment process based on the implementation
of a National Monitoring System (NMS)
the NMS would facilitate movement towards more
cohesive drought early warning and support through agreed data sets
and analyses
-
the States would use the NMS to support their own drought
declaration systems
-
replacement of the existing severe and prolonged downturn in
regional income criterion for an EC declaration with a production
based criterion
-
the States and Territories to continue lodging EC applications
but in a streamlined form supported by the information in the
proposed NMS and
-
the National Rural Advisory Council (NRAC) to continue to assess
applications and make field visits, and make recommendations on
declarations.
5. EC declarations will continue
to be based on a rare and severe event (one in 20-25 years) which
could not have been predicted and
6. governments, and the National
Farmers' Federation, to continue to work on the harmonisation of
state drought declarations and state support measures, while
working to achieve a managed transition from drought business
support to drought preparedness activities.
April 2005 PIMC agreement
On 14 April 2005 the PIMC agreed to:(12)
revised objectives for the National Drought
Policy that include recognition of the need for appropriate
assistance to be provided to producers experiencing exceptional
drought and for this assistance to be equitable, efficient and
timely using best science and information. The objectives of the
1992 National Drought Policy relating to self reliance by farmers,
maintenance and protection of the resource base and the need to
facilitate early recovery from drought remain central to the new
objectives
-
governments and the National Farmers' Federation working
together on the harmonisation of Commonwealth and state/territory
support measures, while working to achieve a managed transition
from drought business support to drought preparedness
activities
-
the continued development, testing and implementation by July
2006 of a National Monitoring System for broadacre industries
-
existing drought cost sharing arrangements remaining in place
for the duration of the current drought and
-
consider in October 2005, a proposal for cost sharing of EC
business support at 90:10 in the first year and 50:50 in the second
and subsequent years, with states and territories being granted
credit for expenditure on measures from a pre-agreed menu of
state/territory drought assistance measures.
PIMC s decisions were hailed as a drought policy reform
breakthrough by Minister Truss.
May 2005 Prime Minister announces
2005 drought package
On 30 May 2005 the Prime Minister announced the 2005 Drought
Assistance Package.(13) The main elements are:
June 2005 further initiatives
announced by Minister Truss
-
Further initiatives to help more farmers gain access to ECIRS
were announced on 16 June 2005 by Minister
Truss:(14)
-
a 28 day grace period for ECIRS applications after the closing
date due to some confusion connected with various EC declaration
dates covering different producer types within the same area
-
greater access to ECIRS for farmers who have bought an
additional farm since the drought began and
-
a reduction from 12 to 9 months in the period farmers need to
wait between ECIRS applications.
The government claims it
has provided for around 33 800 applications for EC income
support, and 16 600 applications for EC business support thus
far during the current drought. This amounts to a claimed over $680
million in drought assistance payments direct to farmers across the
country.(15)
One of the long-standing complaints of farmers
has been the red tape and bureaucracy involved between the states
and the federal government in issuing EC
certificates.(16) The proposed amendments to the FHSA in
this Bill to allow Centrelink officers to issue EC certificates
will be welcomed by farmers.
The National Farmers Federation (NFF)
generally supports the measures contained in the government s 30
May 2005 drought assistance package.(17) The NFF was
critical that business support was not provided in the form of
grants, rather than interest rate subsidies, a request the NFF has
been asking for, it claims, for over five years.(18)
Some of the drought relief measures and drought relief policies
of the government have been criticised. Interest rate subsidies
have been criticised as they provide most relief to those farmers
most in debt.(19) The more efficient and less in debt a
farmer is, the less assistance they qualify for.(20)
Another criticised element is the $10 000 income exemption for
off farm income. This is far more generous than other welfare
income exemptions and why should farmers deserve more welfare
assistance whilst sole parents are being pushed into less generous
assistance?(21)
Item 1 proposes to insert the new term of
off-farm salary and wages into section 24A of the FHSA, being the
section that works out the rate of ECRP assistance.
Item 2 inserts a new section into the FHSA
prescribing who can issue an EC certificate, being the Secretary.
The Secretary is to be the Secretary of Human Services, delegating
powers to officers in Centrelink. This is designed to address one
of the major complaints of the EC processes over the past few
years, being the complications and delays in getting State Rural
Adjustment Authorities to issue EC certificates. Delays in issuing
EC certificates have also been the subject of criticism by the
Australian National Audit Office 2005 report into Drought
Assistance.(22) It is anticipated that if Centrelink
officers can issue EC certificates, this will speed up the process
of assessing individual farmer s applications for EC relief.
Item 4 inserts sections into the FHSA to exempt
up to $10 000 a year in off-farm salary and wages for the
period 1 July 2005 to 30 June 2006. This off-farm income exception
is not to assist existing Farm Help recipients and is only to apply
for farmers who have been granted ECRP and for the 12 month period
commencing 1 July 2005.
Item 5 inserts a transitional provision into
the FHSA so that the EC certificates issued by State Rural
Adjustment Authorities prior to 1 October 2005 are not invalidated
by the new EC issuing provisions to be inserted by Item
4 and continue to have validity.
Concluding Comments
The amendments to the FHSA presented in this Bill break some new
ground in terms of drought assistance. Firstly, the power to issue
EC certificates is to be given to Centrelink to address a
long-standing concern of farmers that the State Rural Adjustment
Authorities are too slow in issuing these certificates. Secondly,
the exemption of up to $10 000 in off-farm income from the
income test for ECRP addresses concerns that farmers with off-farm
income are being discriminated against in accessing ECRP.
Farmers organisations are not entirely happy with these
initiatives, still preferring to see business grants and cash
handouts, rather than interest rate subsidies.
-
Bureau of Meteorology, Drought Statement, 2 June 2005
.
http://www.bom.gov.au/announcements/media_releases/climate/drought/20050602.shtml
-
Bureau of Meteorology
Annual climate summary 2004 6 January 2005
-
Recommended references for the earlier history of drought policy
are Burdon,
Alan, Dry Paddocks, Damp Policies: Drought Assistance
Strategies and their Effectiveness, Research Paper No.6,
1995-96, Parliamentary Research Service and
Botterill, Linda, 'Uncertain climate: the recent history of
drought policy in Australia', Australian Journal of Politics
and History Vol 49(1), March 2003
-
Truss Pledges Revamp of EC , Media release, the Hon. Mr
Warren Truss, MP, Minister for Agriculture, Fisheries and Forestry,
18 February 2000.
http://parlinfoweb.parl.net/parlinfo/Repository1/Media/pressrel/FSU060.pdf
-
Minister Truss Calls Drought Roundtable , Media
release, the Hon. Mr Warren Truss, MP, Minister for
Agriculture, Fisheries and Forestry, 27 February 2004. http://www.maff.gov.au/releases/04/04028wt.html
-
National Drought Review Panel,
http://www.affa.gov.au/content/output.cfm?ObjectID=85E88C00-9B03-4067-8C3A22241789136C#panel
-
National Drought Policy the way ahead , Media release,
the Hon. Mr Warren Truss, MP, Minister for Agriculture, Fisheries
and Forestry, 15 April 2004. http://www.maff.gov.au/releases/04/04094wt.html
-
Truss welcome EC reform support , Media release, the
Hon. Mr Warren Truss, MP, Minister for Agriculture, Fisheries and
Forestry, 27 July 2004. http://www.maff.gov.au/releases/04/04216wt.html
-
Truss announces more work to streamline EC , Media
release, the Hon. Mr Warren Truss, MP, Minister for
Agriculture, Fisheries and Forestry, 31 August 2004. http://www.maff.gov.au/releases/04/04262wt.html
-
he prime minister must act on drought reform , Media
release, National Farmers Federation, No. 58/05, 19 May 2005.
http://www.nff.org.au/pages/nr05/058.html
-
Six point Truss plan to end drought aid wrangle , Media
release, the Hon. Mr Warren Truss, MP, Minister for
Agriculture, Fisheries and Forestry, 6 April 2005. http://www.maff.gov.au/releases/05/05074wt.html
-
Primary Industries Ministerial Council Meeting Communiqu ,
Media release, the Hon. Mr Warren Truss, MP, Minister for
Agriculture, Fisheries and Forestry, 15 April 2005. http://www.maff.gov.au/releases/05/pimc8.html
-
New drought package raises assistance to 1.25 billion ,
Media release, the Prime Minister, the Hon. Mr John
Howard, MP, 30 May 2005 . http://www.pm.gov.au/news/media_releases/media_Release1405.html
-
Drought assistance changes to boost farmers' access to EC
interest rate subsidies , Media release, the Hon. Mr
Warren Truss, MP, Minister for Agriculture, Fisheries and Forestry,
16 June 2005. http://www.maff.gov.au/releases/05/05181wt.html
-
Third year of Australian Government drought support for farmers
in the Moira East region , Media release, the Hon. Mr
Warren Truss, MP, Minister for Agriculture, Fisheries and Forestry,
8 June 2005. http://www.maff.gov.au/releases/05/05174wt.html
-
The prime minister must act on drought reform , Media
release, op. cit.
-
Government recognises severity of on-going drought , Media
release, National Farmers Federation, No. NR 66/05, 30 May
2005. http://www.nff.org.au/pages/nr05/066.html
-
ibid.
-
Alan Mitchell, Farm aid a barren policy , The Australian
Financial Review, 1 June 2005, p. 62.
-
ibid.
-
ibid.
-
Australian National Audit Office, Audit Report No. 50 2004-05,
Drought Assistance, Auditor General Performance Audit,
Australian National Audit Office, Canberra, 2 June 2005.
Audit Report - Drought Assistance
Peter Yeend and Peter Hicks
29 June 2005
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
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