IDEAS home Printed from
   My bibliography  Save this paper

Income Related Loans for Drought Relief


  • Bruce Chapman
  • Linda Botterill
  • Michael Egan


There is arguably a consensus that the current approach to drought relief is in need of reform and possibly replacement with an improved government financial assistance mechanism. Grants to farmers, in the form of interest rate subsidies, have several difficulties, which in summary are as follows: i. There are typically too few financial resources to be drawn from government to address adequately and equitably the needs of farms in a dire drought situation. ii. The rationing arising from (i) means that access to assistance requires complex eligibility criteria, resulting in application and administrative processes that are complex and thus expensive for both farmers and government. iii. Grants for drought relief are financed by contributions from all taxpayers, and it is very likely to be the case that this is regressive. Average taxpayers will be less wealthy and have fewer other economic advantages than the majority of farmers assisted through drought relief. This paper outlines the potential advantages and challenges associated with the implementation of income related loan arrangements for drought relief as a possible alternative to the existing interest rate subsidy scheme. The conceptual basis of income related loans is explained, and reference is made to the application of policies of this type in other areas of government financial intervention. The paper addresses the administrative challenges associated with such a policy reform, with reference to the idiosyncrasies of agricultural financing. An illustrative example is offered of what an income related loan applied to drought assistance might mean for the time stream of both revenue for the Commonwealth budget and repayment obligations for farms differing by economic size.

Suggested Citation

  • Bruce Chapman & Linda Botterill & Michael Egan, 2004. "Income Related Loans for Drought Relief," CEPR Discussion Papers 472, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  • Handle: RePEc:auu:dpaper:472

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    income related loans; drought policy; agricultural subsidies;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:auu:dpaper:472. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.