Drought resilience and preparedness

Published 1 Nov 2018

Pete Mailler 
Goondiwindi grain  
and cattle producer
Michael McCormack 
Deputy Prime Minister and 
Leader of The Nationals

Q1. How should climate change alter the way we address drought policy?

Pete Mailler As a nation, Australia needs to realise that agriculture is a social imperative as well as a business.  As such, we must develop policies that acknowledge its unique and strategic importance. We don’t need a drought policy so much as we need a policy that mitigates the inevitable suite of increasingly hostile hot, dry and wet weather disruptions which climate change will deliver.
There is a high degree of scientific consensus indicating climate change will increase disruptions to food production and supply chains globally over time, as the frequency and intensity of drought events is highly likely to increase. Australian policies need to consider threats to global food security from a changing climate.
Arguably one of the more significant impacts of drought is the residual compromise to productive capacity of the landscape.  The impact of a drought event depends a lot on the preceding conditions.  Compromised production systems subject to frequent drought suffer cumulative impacts and the entire system is at risk of failure from increasing heat and dry. Policies that facilitate earlier interventions are needed to ensure shorter recovery periods coming out of drought, to underpin the resilience of the agricultural sector in Australia.

Michael McCormack 

The Federal Government’s drought policy approach has always understood and acknowledged the continual need to manage the complex social and economic realities of the climate in a pragmatic way.This is always evolving and The Nationals – more than most – are acutely aware of this priority because we live with the everyday challenges of the vagaries of the weather, alongside the farmers, families, farm businesses and communities we represent.

We’ve been getting on with the job of addressing the real issues and taking positive action to provide considered and measured relief. Our sensible response has been driven by high level attention and action, from the Prime Minister through to all levels of Government.
We’ve engaged in a consistent and pragmatic conversation with farmers and key stakeholders about the specific tools they need to manage the multiple, diverse challenges Mother Nature throws at them; not just this season but well into the future.

Whether this is another tough season that’s too wet or too dry, the key to success is giving farmers the backing they need to mitigate the many risks they face – many of which are beyond their control – to remain profitable and sustainable.

Q2.  What sort of policy measures could make farm businesses more resilient?

Pete Mailler In the short term there is an urgent need to intervene to stabilise the social structure of regional Australia and retain human capital in agriculture. The people most affected by disruptions to income are those with debt.  The best way to keep people on farms and in the bush immediately is to reimplement an interest rate subsidy for as long as the current drought impact persists.
The lack of any implemented coherent or proactive drought mitigation policies in the past decade that would have meaningfully incentivised better management, and thus improved resilience, means the justification to reject broad, untargeted subsidies in response to this drought is moot. The economic rationalists won’t agree, but they should have done a better job of presenting and implementing better policy solutions when there was time.

In the long term there are far better strategies to deploy.
Australia should consider the implementation a food security levy on all food sold through supermarkets immediately. This levy should apply equally on imported and Australian produce, fresh and processed. This money should be collected and quarantined to fund necessary strategic and tactical responses, including underwriting comprehensive insurances, to mitigate inevitable future disruptions to agriculture that are beyond the reasonable ability of a small business to mitigate internally. 
Maximising returns in every season is the key to underpinning resilience in tough seasons.  Agricultural supply chains are adversarial and there is an extraordinary concentration of market power creating asymmetry that unfairly limits transparency and fair price discovery.  This must be fixed.  
Access to and cost of capital are significant issues for agricultural resilience.  

  • Secure tenure should be regarded as bankable security to increase tenancy terms, decouple land ownership and production businesses and facilitate new entrants into agriculture.  
  • Government co-lending models could mitigate perceived credit risk to reduce risk margins and reduce costs of capital. 
  • Performance-based lending products like the original HECS-style lending models could remove short term cash flow pressures from incomes disruption. (These products should be conditional on management parameters.)

The primary focus of these policies is to remove short-term financial pressures that often compromise the long-term management strategies which underpin sustainable production systems and are inherently better at managing environmental/climate disruptions and reducing recovery times.

Michael McCormack Maintaining the bipartisanship which has underpinned recent reforms is critical to advancing drought policy – when our farmers are doing it tough, they want a hand-up from Governments, not a hand-out.

A prime example of this pragmatic support is the long-running research conducted by Rural Research and Development Corporations which includes exploring initiatives such as new varieties of drought tolerant or frost resistant crops.

Following a Productivity Commission review in 2009, a national reform process ultimately removed Exceptional Circumstances policy and placed greater focus on drought preparedness and resilience.

One of the core planks was shifting away from the farm sector’s reliance on Government subsidies, which exerted artificial influence on agricultural markets and prolonged tough decisions by farmers in areas perceived to be exposed to greater risks of a changing climate.

These changes saw the Farm Household Allowance scheme introduced. The Agricultural Competitiveness White Paper delivered in 2015 included funding to build water infrastructure to boost agricultural production and help drought-proof communities. This Government has committed almost $2.6 billion to assist State and Territories to undertake major water infrastructure projects. The White Paper also provided new funds to improve seasonal forecasting tools and the assessment of a potential Multi-Peril Crop Insurance scheme to help farmers mitigate production risks.

While Government can’t make it rain, or predict the weather 100% accurately next season or 50 years into the future, we can certainly make a real difference by maintaining on ongoing dialogue with our farmers to produce a responsible and practical policy response to drought.

Q3.  What practical measures could make farming practice and systems more resilient?

Pete Mailler Frequently the debate that impedes practice change in agriculture is the same as the current policy paralysis around climate change. Conservative thinking irrationally declares that we can’t afford an obviously essential transition to a new system, when the evidence proves that we simply can’t afford not to transition to new systems.
Agriculture has become a low-return, high-risk business and climate change science indicates increasing risks. Practical solutions must improve returns and reduce risks.
There are few if any step changes in production technology that we aren’t yet aware of as an industry and that haven’t been, or aren’t being, taken up across the sector.
Perhaps the biggest unrealised opportunity lies in the rapid uptake of renewable energy generation.   State and federal policy settings are stifling investment opportunities that provide an alternative income and/or directly reduce energy costs for regional business and communities alike.
In the end though, it doesn’t matter how good a farmer you are if it just doesn’t rain enough.  

Michael McCormack 

In response to the current drought, one of the worst on record in some parts of Queensland and NSW, the Federal Liberal and Nationals’ Government has provided additional $1.8 billion funding in recent months to support farmers and farming communities. This funding has provided immediate relief while building on the existing suite of drought resilience and preparedness measures. For example; red tape has been cut to improve Farm Household Allowance delivery; Rural Financial Counselling Service officers and mental health services have been bolstered; additional funding has gone to local infrastructure projects through the Drought Communities Program; and National Drought Coordinator Major General Stephen Day was appointed to work across various agencies and stakeholder groups to enhance targeted support.

Delivery of low-interest drought support loans has been improved through the Regional Investment Corporation and popular taxation measures have also been enhanced or extended – such as instant asset write-offs for farm assets and Farm Management Deposits – to strengthen preparedness and resilience.

At the recent Canberra Drought Summit, the Federal Government also revealed the $5 billion Future Drought Fund which will have a strong focus on strategic water infrastructure projects. This investment will put money away for a non-rainy day, which we know happen all too regularly.

Another $15 million was announced for the Regional Drought Communities Small Grants Program to be managed by the Foundation for Rural & Regional Renewal. State and Territory Governments have also been invited to apply for a share of $72 million in water infrastructure funding for drought-affected regions. 

A Drought Finance Taskforce has also been established to examine ways to provide further financial support for farmers and small businesses and share critical information more effectively.

Q4.  What’s standing in the way of better drought preparedness policy?

Pete Mailler Policy development in Australia is impeded by political complacency and a wilful ignorance around the central importance of agriculture, which is out of step with the rest of the world.
Agriculture is the cornerstone of every civilisation, essential not only to Australian domestic capacity but also to the geopolitical stability of the entire region, and it should be recognised as such both socially and politically. Food security is not an abstract concept: history is littered with examples of massive social destabilisation due to agricultural failure. More people died of starvation after WW2 than the combined death toll during hostilities; an estimated 45 million people starved in China after the communist revolution, and the ongoing Syrian civil war (our first ‘climate war’) has been largely caused by drought-driven migration.
Our political leaders need to look beyond media approval and the next election cycle to plan brave, long-term policies that may be unpopular but will ensure a food-secure future.

Michael McCormack Farmers are our best environmentalists and use every drop of water responsibly and maximise its benefits and they are among the most adaptive to innovations and technology of all industries in our country.

In this ongoing conversation about drought policy measures, farmers, farm leaders and experts are clearly saying they don’t want Government interfering needlessly in their businesses, no matter how well intended that help may be.

Therefore the Government’s drought policy response must always strike the right balance, to ensure there are no unintended consequences of their actions; especially on land values which ultimately underpin all farming operations.

One farmers’ drought is another’s profit opportunity and seasonal fluctuation risks are best managed by those who can bank some money during the good seasons and invest wisely, to ensure they survive the bad ones which will inevitably arrive.

What we don’t want to see happen is bad policy driven by misinformed debate and farmers being lectured to by a Labor and Greens Government; despite their ingrained, natural expertise.

Farmers don’t need and should not be told; where they can farm; what they can farm; and how they should farm.

About the authors

Pete Mailler is a 47-year-old grain and cattle producer from Goondiwindi.  He has an ag science degree, is a fellow of the Australian Rural Leadership Foundation and has experience in agronomy, rural finance and agricultural advocacy.  

A former newspaper editor, Michael McCormack was elected as The Nationals’ Member for Riverina in 2010. In 2013 Michael was promoted to Parliamentary Secretary to the Minister for Finance, Assistant Minister to the Deputy Prime Minister and Assistant Minister for Defence. Michael became Small Business Minister in 2016 and was then made Minister for Veterans’ Affairs and Minister for Defence Personnel becoming the Leader of The Nationals and Deputy Prime Minister in February 2018.

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