Government Farm Financial Risk Management Measures

Government Farm Financial Risk Management Measures

Government policies aimed at addressing risk in Australian agriculture have a long and chequered history. While a range of government programs and schemes intended to improve management of financial risks is available to Australian farmers, there is little evidence to indicate that the majority of past policies can be considered successful in smoothing the volatility inherent in the sector.

The continuance of ad hoc policy responses to periods of adverse climatic conditions (particularly drought) is an indication that policy settings are still not delivering a predictable, stable operating environment for agriculture, in which Government intervention delivers the most efficient and fair distribution of taxpayer funds. In many cases, these ad hoc and often politically-motivated responses cause perverse and distortionary results within the sector.
This research has identified and described Australian Government farm financial risk management measures and those maintained by governments in other major developed countries in order to make recommendations on how Australian policy measures could be improved.

In 2020, the AFI participated in a multi-organisation project coordinated by the National Farmers’ Federation (NFF) investigating different aspects of risk management in Australian agriculture.

The NFF partnered with the NSW Government on a project aimed at improving the financial risk management options available to Australian farmers to help them manage drought and other natural disasters.

The multi-commodity, national project examined the following six topics in detail:

  1. Commercial and government-subsidised insurance options
  2. Forward contracts, futures, options and swap markets and associated product options
  3. Mutuals and co-operatives
  4. Awareness and education of financial risk management options
  5. Off-farm income and assets
  6. Other government risk management measures

The NFF commissioned six sub-project teams to provide research, analysis and recommendations on these topics. The teams included experts in farm business management, commercial financial risk management products, agricultural research, strategy, economics and government policy.
Each sub-project examined existing arrangements in Australia, including their strengths and weaknesses. They looked at overseas examples and assess whether lessons learnt in other countries could be applied in Australia, and scanned existing and new options for improving or expanding financial risk management tools and products available to Australian farmers.

The sub-project teams were tasked with working together to ensure new options for managing farm financial risk were considered as a suite of options available to farmers, and the Australian Farm Institute was assigned to sub-project 6 (Other government risk management measures).

AFI’s research identified and described Australian Government farm financial risk management measures and those maintained by governments in other major developed countries to make recommendations on how policy measures could be improved.

The complete report encompassing a synthesis of all six sub-projects prepared by Pottinger is available at nff.org.au/programs/financial-risk-management/, along with the six individual sub-project reports.

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