Income Contingent Loans for Drought Relief: Delivering better outcomes for farmers and taxpayers
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.
|Date of creation:||Jan 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +61 2 6125 3807
Fax: +61 2 6125 0744
Web page: http://rse.anu.edu.au/cepr.php
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:auu:dpaper:597. 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: ()
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.