Australia’s National Drought Policy is considered to be one of the most advanced in the world, recognising as it does the reality of climate and focusing on adapting farm management to climatic uncertainty rather than simply subsidising agriculture in low rainfall areas. But while the underlying principles of the Policy seem to be sound, after nearly two decades of implementation and incremental changes to the instruments applied under the policy have resulted in the loss of the risk management message, ongoing use of the exceptional circumstances provisions and growing inequities between farmers, and between farmers and non-farmers. In this paper we argue that the objectives of the Policy need to be reaffirmed and key policy changes made to ensure the outcomes of the policy more closely align with its intentions. We analyse financing policy issues and propose the introduction of an income contingent loan (ICL) for drought relief as an equitable and efficient policy instrument for delivering relief to farm businesses experiencing drought, and perhaps for other adverse circumstances. It is argued that such a policy reform would allow farm businesses to take advantage of ICL insurance benefits associated with default protection and income smoothing, while at the same time minimising taxpayer contributions to drought relief.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Centre for Economic Policy Research, Research School of Social Sciences, Australian National University in its series CEPR Discussion Papers with number
597.