Bruce Scott (Maranoa, National Party) Share this | Link to this | Hansard source

My question is addressed to the Treasurer. Would the Treasurer inform the House of the economic effects of the worsening drought? How is the government assisting farmers in these very difficult times?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I thank the honourable member for Maranoa for his question. The drought in Australia is worsening. The June quarter national accounts showed that farm GDP fell 2.3 per cent. If we had a 2.3 per cent fall in GDP generally, that would be a very, very severe recession. Severe rainfall deficiencies have extended across Australia over the past few months. The Bureau of Meteorology reported in its October statement:

September 2006 saw continued below average rainfall across southern and central parts of the mainland, with deficiencies generally expanding or intensifying over South Australia, New South Wales and Victoria. Furthermore, the dryness was exacerbated by temperatures that were well above normal.

In response to these weather conditions, ABARE has revised its forecast and forecasts that Australia’s winter crop production will fall from 40.8 million tonnes to 26 million tonnes, a 40 per cent drop in the winter crop. The largest declines in production are expected to occur in Queensland—the state of the honourable member for Maranoa—and Western Australia. That was in relation to the September quarter and to date there has been no real good news in October.

There is also a human face behind the drought and the crop failures and that is the extreme pressure that farmers and farming families are under as a consequence. During the current drought, the Australian government has spent around $1.25 billion in drought assistance through exceptional circumstances. Exceptional circumstances mean that farmers can receive relief payments, which are at the rate of the Newstart allowance, to help them meet daily living expenses. They also receive a health care card and may receive concessions under youth allowance means tests for dependent children. Eligible farmers can also receive subsidies of 50 per cent of interest costs in the first year and 18 per cent of interest costs in the second year of an EC declaration, to a maximum of $100,000 per year or $300,000 over five years.

These are provisions to keep farmers going during drought periods. The government has also put in place a number of other measures under the Agriculture Advancing Australia program, including rural financial counselling, Farm Help and the Farm Management Deposit Scheme. The situation will undoubtedly detract from overall growth, although agriculture is not as large a proportion of the overall GDP as it was in previous years, but the suffering of farmers and farm families under this cannot be overestimated. The government stands ready to help them through these extremely difficult times with the programs that I have outlined.