Severe rainfall deficiencies have existed for some time in
Queensland and parts of northern New South Wales (NSW). The 2015–16
Budget adds further measures to support communities and businesses affected by
droughts in Australia.
Of the drought package, the only new measure in the Budget
is $35 million for infrastructure projects in drought affected areas. This
measure will provide funding for shovel ready projects that offer the greatest
potential to stimulate the local economy in drought affected areas over four
years. Few other details are available as to which projects are eligible, or
who determines which project has the greatest potential to stimulate the local
The major measure in the drought support package is $250
million for the continuation of the drought specific loans schemes in 2015–16,
$150 million for the Drought Concessional Loan (DCL) and $100 million for
the Drought Recovery Concessional Loan (DRCL). Unlike other support mechanisms,
such as the general farmer support mechanism and the DCL, which operate
Australia wide, the DRCL is available only in Queensland and NSW. Other
differences between the two loans are the extreme drought requirement of the
DRCL (characterised as a one-in-fifty year rainfall deficiency) and interest
rates (which are 3.84 per cent for the DCL and 3.21 per cent for the
A further feature of the DRCL is that in Queensland it is
also available to farms which are experiencing a less than extreme drought but
were affected by the disruption to the live cattle trade with Indonesia in
The DRCL is not available in the Northern Territory, although Northern
Territory farms were impacted by the disruption to the live cattle trade.
Also available up to 1 July 2015 is the Farm Finance
Concessional Loan Scheme (FFCLS—first introduced in the 2013–14 Budget),
providing $420 million in concessional loans over two years (to 2015–16).
The FFCLS is available to any farm business which meets the eligibility
criteria, not just those in drought affected areas. Currently
the FFCLS has a concessional interest rate of 4.34 per cent.
Take-up of concessional loans
The table below outlines the take-up of concessional loans.
The Budget provides additional funds to extend the drought specific loans into
2015–16. Whether this will be an effective drought support measure is questionable
as take-up has been low since the loans have been available, and the new scheme
has more restricted eligibility.
Table 1: Take-up of concessional loans
DCL and FFSCL take-up to 30 September 2014
Source: Compiled by Parliamentary Library from data obtained in responses to questions in writing.
The low take-up may be due to complex or stringent
eligibility criteria, which according to the National Farmers Federation have
‘caused angst for many in the farm sector’. The DCL and DRCL are
administered by the Department of Agriculture and common eligibility criteria
that the financial impact is as a result of a drought (which is
defined in terms of a rainfall deficiency over a given period when compared
with similar periods over the whole historical record)
that the farm business has taken reasonable steps to prepare for
the effects of the drought and
that the farm business has an ability to repay the loan.
Fiona Simson, president of NSW Farmers, is cited as
believing that concessional loans are unlikely to help farmers at breaking
Similarly Dave Marshall, a farmer in northern NSW, is quoted as stating ‘loans
are good, but they’ll probably only give it to you if you’re in a good
Other measures in the 2015–16 Budget are additional funds of
$20 million to extend access to social and mental health services in drought
affected communities, $25.8 million to continue pest and weed management in
drought affected areas and $1.8 million for the Rural Financial Counselling Service.
Fifteen million dollars is allocated for the National
Partnership on assistance for water infrastructure and pest management in
drought affected areas through the Environment portfolio. Tax measures are also
included which will allow primary producers to immediately deduct capital
expenditure on fencing and water facilities such as dams, tanks, bores and
irrigations. Capital expenditure on fodder storage assets will also be eligible
for depreciation over three years. This change will be for income years
commencing on or after 1 July 2016.
Treatment of $272 million in the Budget papers
Budget Paper No. 2 states that the government
will provide $271.8 million over four years to extend current drought
concessional loans. The supporting table, however, shows only $31.1 allocated
in 2015–16 and $0.3 million in 2016–17. This is because the bulk of the
measures included in this $271.8 million are concessional loans to drought
affected farm businesses. The granting of a loan does not create an expense
itself because the Commonwealth will be repaid the monies in full. The
only expense that the Commonwealth needs to incur is the differential between
the regular and concessional interest rates and administration costs associated
with implementing the loans. As a result, only $9.3 million in
2015–16 is actually allocated for the concessional loans with a further $0.3
million in 2016–17.
Bureau of Meteorology states that ‘long-term deficiencies in Queensland are now
a result of three consecutive poor wet seasons’. Bureau of Meteorology (BOM), ‘Rainfall deficiencies’, BOM
budget figures in this article have been taken from the following document
unless otherwise sourced: Australian Government, Budget
measures: budget paper no. 2: 2015–16.
. As of 14
May 2015. Department of Agriculture (DA), ‘Drought
Recovery Concessional Loans’, DA website.
of Agriculture, ‘Drought Recovery Concessional Loans’, ibid.
. Australian Government, Budget measures: budget paper no. 2: 2013–14, pp. 76–7.
of Agriculture (DA), ‘Farm
Finance Concessional Loans Scheme’, DA website. See here also for FFCLS
of Agriculture, ‘Farm Finance Concessional Loans Scheme’, op. cit.
. B Joyce
(Minister for Agriculture), ‘Answer
to Question in Writing: Farm Finance Concessional Loans Scheme’,
[Questioner: J Fitzgibbon], Question 268, House of Representatives, Debates,
28 October 2014 and B Joyce (Minister for Agriculture), ‘Answer
to Question in Writing: Drought Concessional Loans Scheme’, [Questioner: J
Fitzgibbon], Question 287, House of Representatives, Debates, 28 October
Farmers Federation, ‘Further
support for drought-affected communities’, media release, 9 May 2015.
. Department of
Concessional Loans’, DA website. B Joyce, ‘Supporting drought
affected farmers’, op. cit.
. N Keene, ‘Little
relief for dusty paddocks’, Daily Telegraph, 16 May 2015.
Budget paper no. 2: 2015–16, op. cit., p. 58.
All online articles accessed May 2015.
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