The National Drought Policy

Commonwealth and state ministers, through the Ministerial Council, announced a new National Drought Policy in July

1992. As recommended by the Drought Policy Review Task Force, the policy was based on principles of sustainable development, risk management, productivity growth, and structural adjustment in the farm sector. Support for productivity improvement and improved risk management was to be provided through the commonwealth government's main structural adjustment program for agriculture, the Rural Adjustment Scheme, which was being reviewed concurrently with development of the National Drought Policy.

The revised Rural Adjustment Scheme incorporated the new concept of "exceptional circumstances" under which support would be made available for farm businesses faced with a downturn for which the best manager could not be expected to prepare. Eligible events were not limited to drought. The exceptional circumstances provisions became the basis for the delivery of support during the droughts of the mid-1990s and 2002-03. Support, in the form of interest rate subsidies on commercial finance, was available only to farmers with long-term viable futures in agriculture. The rationale for this approach was that drought relief should not act as a de facto subsidy to otherwise nonviable businesses. In addition to exceptional circumstances support through the Rural Adjustment Scheme, schemes were set up to enable farmers to build financial reserves as part of their risk management, and governments made a commitment to invest in research and development, including climate research, and in education and training. The state governments agreed to phase out transaction-based subsidies such as fodder subsidies, and support was made available to help nonviable farmers leave the land. Farmers who decided to exit farming were supported with reestablishment grants and a loans-based income support scheme.

The timing of the National Drought Policy, which took effect in January 1993, could not have been more unfortunate. Parts of Queensland and New South Wales, which had been experiencing dry spells since about 1991, were settling into what was to become one of the worst droughts of the 20th century. In addition, farmers had been coping with historically high interest rates and low commodity prices. These factors combined to make the notion of preparing for drought particularly problematic. The exceptional circumstances provisions of the Rural Adjustment Scheme were triggered immediately after the scheme commenced (although ironically their first use was in response to excessive rain in parts of South Australia and Victoria), and these provisions quickly came to dominate the new scheme.

By mid-1994 the drought situation was being described as the "worst on record" (Wahlquist and Kidman, 1994) and several media organizations launched a public appeal to raise funds for drought-affected farmers. In September 1994, Prime Minister Paul Keating visited one of the worst affected areas and shortly afterward announced the establishment of a welfare-based drought relief payment scheme to help farmers meet day-to-day living expenses. Unlike assistance available through the Rural Adjustment Scheme, the drought relief payment was not limited to farmers with a long-term future in farming, but it was restricted to farmers in areas declared to be experiencing exceptional circumstances. The welfare payment was only for farm families affected by drought and was not available during other forms of exceptional circumstances.

In 1997, following the end of the drought and a change of government at the commonwealth level, a review was initiated into the operation of the National Drought Policy. The review endorsed the risk management approach of the policy but recommended some changes to its operation. At the same time the drought policy was under review, the Rural Adjustment Scheme was also reviewed and subsequently wound up being replaced by a suite of programs under the title "Agriculture—Advancing Australia" (Anderson, 1997). The new programs were not dissimilar from those they replaced and continued to be aimed at improving farm productivity and risk management. The drought relief payment was retained but extended to address a wider range of exceptional circumstances beyond drought, thus being renamed the "exceptional circumstances relief payment." In 1999, commonwealth and state ministers decided to refocus exceptional circumstances support on welfare relief and phase out the business support components that had been provided through interest rate subsidies.

In 2002 and 2003, Australia experienced widespread drought, with some regions registering the lowest rainfall on record (Bureau of Meteorology, 2002). The National Drought Policy was once again put to the test, and a number of ongoing problems with the system have once again come to the fore. First, the continuing lack of an agreed-upon definition of exceptional circumstances hampers the establishment of a stable, predictable environment within which policy makers and farmers must operate. While the trigger point at which support becomes available, and the nature of that support, remains fluid, farmers' risk management strategies will be hindered and the expectation of support is likely to generate less than optimal management decisions. The term exceptional circumstances was not defined in either the legislation establishing the provision or any of the accompanying explanatory material, such as ministerial speeches. Attempts have been made over the life of the National Drought Policy to develop an objective, "scientific" definition of exceptional drought, but, as is generally agreed in the international literature, drought is very difficult to define (Dracup et al., 1980; Wilhite, 2000b; Wilhite and Glantz, 1985). Second, exceptional circumstances declarations have been geographically based, resulting in what has become known as the "lines on maps" problem. Thus, farmers in arguably objectively similar circumstances are treated quite differently because of the placement of the boundary delineating exceptional circumstances areas. Because considerable government support is available to those on the "right" side of the line, this is an issue of great concern. The problem was recognized in 2001 when ministers agreed to the introduction of "buffer zones" around exceptional circumstances areas so that farmers in "reasonable proximity" to but outside the defined zones could apply for support (Agriculture and Resource Management Council of Australia and New Zealand, 2001).

The application process for assistance was also changed to allow farmers to make a prima facie case that they qualified for support. If the application was subsequently rejected, farmers would still be able to receive up to 6 months of welfare support, whereas successful applications would result in income support payments for 2 years (Truss, 2002b). Eligibility was further relaxed by the decision to extend exceptional circumstances declarations to an entire state once 80% of it qualified under the exceptional circumstances program.

During the 2002-03 drought there was evidence of some success with the risk management approach to drought preparation. In 2002, Australian farmers held approximately AU$2 billion in farm management deposits, a special scheme to help farmers build financial reserves in preparation for downturns such as drought.

Continue reading here: Current Status and Future Directions

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