Rural affairs Drought Assistance

Budget Review 2009-10 Index

Budget 2009 10: Rural affairs

Drought assistance

Peter Hicks

Continued funding of longstanding measures which provide household and business support to primary producers and, more recently, small businesses is provided in the 2009–10 Budget. The major component of the measures is the Exceptional Circumstances (EC) provisions for income support to households – EC Relief Payments (RP) – and interest subsidies to businesses – EC Interest Rate Subsidies (IRS).

The announced funding is summarised in the following table. For some of the measures, expenditure is spread across several agencies however the Department of Agriculture, Fisheries and Forestry (DAFF) and Treasury account for the vast bulk of funds.

Drought assistance measures 2009-10 Budget ($m)

Drought assistance measures 2009-10 Budget ($m)

Source: Australian Government, Budget measures: budget paper no. 2: 2009–10.[1]

Under the new arrangements for federal financial relations that came into effect on 1 January 2009, EC IRS payments which are administered by the states will now be funded from Treasury not DAFF. EC IRS payments account for about half of total EC funding announced in the Budget. For some of the measures identified in the above table, Budget Paper no. 2 states that their cost in 2008–09 will be met in part or full from existing DAFF resources. In addition, DAFF will provide $5.7 million in 2009–10 for transitional income support from existing resources.[2]

The above table shows that the budget measures provide a total of $564.9 million in new drought support funding with $556.8 million of this to be spent in 2009–10. According to the Minister for Agriculture, Fisheries and Forestry the Government ‘has allocated $715.3 million in the 2009–10 Budget to continue support for drought affected farmers, farm families, small businesses and rural communities’.[3] This seems to indicate some $150.4 million of drought support funding will come from existing DAFF resources and/or amounts budgeted for previously. The Budget does not provide further information on this matter.

EC support payments have increased sharply in recent years, reflecting the prolonged and widespread dry seasonal conditions in many of Australia’s agricultural regions. Between 1994–95 and 2004–05 annual payments did not exceed $300 million and were well under $200 million for most years during that period. In 2005–06 payments topped $400 million. They reached $800 million in 2006–07 and almost $1 billion in 2007–08.[4]

The increase in EC expenditure is paralleled by an increase in the number of recipients of EC support as reported by the Productivity Commission in the following table.

Drought assistance recipients, 2002–03 to 2007–08

Drought assistance recipients, 2002–03 to 2007–08

Source: Productivity Commission, Government Drought Support, p. XXVI.[5]

Drought policy review

In April 2008 the Minister for Agriculture, Fisheries and Forestry announced a review of drought policy ‘to help prepare farmers and local communities for climate change’, with the aim of having an improved drought policy in place by July 2009. The Minister advised the review would include:

  • an economic assessment of current drought support measures by a Productivity Commission (PC) report
  • an expert panel to assess the social impacts of drought
  • a detailed scientific examination of likely future climate patterns and the current Exceptional Circumstances standard of a one-in-20-to-25-year-event undertaken by the Bureau of Meteorology and CSIRO.

He also noted:

If droughts become longer and more frequent, farmers may not qualify for drought support under the current definition of an exceptional event, because it may not be something that only occurs every 20-to-25-years.[6]

The scientific study and social impact report were finalised in July 2008 and September 2008 respectively and are available on the DAFF website.[7] The PC report was finalised in February 2009 and released in May 2009.

The report’s key points include:

  • Most farmers are sufficiently self-reliant to manage climate variability …
  • The National Drought Policy’s (NDP) Exceptional Circumstance (EC) declarations and related drought assistance programs do not help farmers improve their self-reliance, preparedness and climate change management …
  • Governments need to commit to a long term reform path that recognises that the primary responsibility for managing risks, including from climate variability and change, rests with farmers.[8]

The Government is still finalising it proposed changes to drought policy.

[1].    Australian Government, Budget measures: budget paper no. 2: 2009–10, Commonwealth of Australia, Canberra, 2009, pp. 81–85, 162, 228, 297, 327, viewed 14 May 2009,

[2].    Budget measures: budget paper no. 2: 2009–10, p. 85.

[3].    T Burke (Minister for Agriculture, Fisheries and Forestry), Drought support continues for farming families, media release, Canberra, 12 May 2009, viewed 15 May 2009,

[4].    Productivity Commission (PC), Government Drought Support, Productivity Commission Inquiry Report, No. 46, Commonwealth of Australia, Melbourne, 27 February 2009, p. 101, viewed 15 May 2009,

[5].    PC, Government Drought Support, p. XXVI.

[6].    T Burke (Minister for Agriculture, Fisheries and Forestry), Drought policy for Australia's future, media release, Canberra, 23 April 2008, viewed 15 May 2009

[7].    Australian Government, ‘National review of drought policy’, DAFF website, viewed 15 May 2009,

[8].    PC, Government Drought Support, p. XX.