Developing Equtiable and Affordable Government Responses to Drought in Australia

Once again in 2002 Australian taxpayers are being called on to provide relief to drought-affected farmers. Under the National Drought Policy which has been in place since 1992, support is provided by the Commonwealth Government predominantly in two forms: interest rate subsidies to assist farm businesses and a special welfare payment, the Exceptional Circumstances Relief Payment. Support is available under these programs only to farmers in geographically defined areas which have been declared to be experiencing 'exceptional circumstances'. This paper describes a number of problems with this approach and suggests an alternative form of drought relief based on the Higher Education Contribution Scheme, which is more equitable between farmers, less regressive in its impact on tax payers, and less open to politicisation.