Top government adviser blasts Australia's flawed financial response to drought
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Top government adviser blasts Australia's flawed financial response to drought

A top government adviser has blasted Australia's response to drought, saying billions of dollars have been wasted in taxpayer-funded rescue packages that do not help farmers.

In a warning to Prime Minister Scott Morrison, who is drawing up a new response to the worsening disaster, Productivity Commission chairman Peter Harris said the extra help would be "condemned to failure" if policy mistakes of the past were repeated.

Mr Harris pointed to government subsidies that had actually led to higher freight and feed costs, which quickly earned a stinging rebuke from the government’s new drought envoy, the former deputy prime minister Barnaby Joyce.

"It might be a complete waste of money for Mr Harris with his six-figure job, in his office in the middle of town, but the people who are actually trying to survive don't think it is a joke," Mr Joyce told Fairfax Media on Tuesday night.

Mr Harris, who comes from a rural beef background, said decades of drought assistance and taxpayer funding had done little to change the prospects of farmers when the next drought inevitably arrived.

"If it hasn’t worked in the past we are condemned to fail if we keep repeating it," Mr Harris said in response to questions from Fairfax Media on Tuesday.

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"When you see subsidies being introduced for the cartage of feed around the country, look at the history of what that has induced, higher freight rates and a higher cost of feed."

The Coalition announced a $1.8 billion drought package less than a week before the Liberal leadership crisis ended Malcolm Turnbull’s prime ministership, including $500 million in low-interest loans for feed and fodder, $75 million for infrastructure in drought affected areas and immediate tax deductions for hay sheds.

The NSW government has poured up to $500 million into a separate assistance package, including freight subsidies of up to $20,000 per farm. The subsidy has increased the cost of fodder in neighbouring Victoria, where farmers are now spending up to $11,000 a week to feed their cattle.

"There is a counter argument that says we just have to cop that, it's inevitable," Mr Harris said.

"But there is a better analysis which suggests that adjustment programs could have been put in place in the good times. A little bit better delivery of assistance is required here.”

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Mr Joyce, who was appointed a special drought ‘envoy’ on Sunday less than six-months after resigning from the frontbench over an affair, compared drought subsidies to the government providing public transport in capital cities.

“Just like you get a subsidy to go on your train network when you go to work in Sydney or Melbourne there has to be assistance for people in areas that are in the public interest,” Mr Joyce said.

Failed Liberal leadership contender Peter Dutton cited an inadequate response to the drought as one of the reasons for launching last week’s challenge, particularly in Queensland where the Coalition faces a wipeout at the next election.

Mr Morrison responded swiftly by declaring the drought the government's "most urgent and pressing need", and on the weekend vowed to take a "smart" and "co-ordinated" policy approach.

On Monday he vowed drought assistance would go "on for as long as the drought goes on”.

"It's about drought relief and it's about drought recovery as well," Mr Morrison said in the Queensland town of Quilpie.

Prime Minister Scott Morrison prepares to board his plane following a regional drought tour at Quilpie in Queensland.

Prime Minister Scott Morrison prepares to board his plane following a regional drought tour at Quilpie in Queensland.

Photo: Alex Ellinghausen

Nationals MPs have started lobbying the Prime Minister and new Treasurer Josh Frydenberg for a major new package, which would require hundreds of millions in funding.

The government has introduced drought resilience measures, including a $23.7 million on new water-efficient piping and improving forecasts to better advise when farmers de-stock and crops are planted, but much of the funding will be spent on loans and allowances for bills worth up to $12,000 for a couple.

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“The farm household allowance puts tucker on the table for farm families struggling to make ends meet and I absolutely back it," said Agriculture Minister David Littleproud.

Economist Saul Eslake said a consequence of climate change was that agriculture may no longer be sustainable in some parts of the country.

"It might be more sensible to give them assistance to get out of those areas rather than to give them assistance to encourage them to stay,” he said.

While Mr Morrison this week said he was going to "leave the [climate change] debate for another day", Mr Eslake agreed the discussion did not have to start this week.

"But eventually it does have to be part of the conversation.”

Eryk Bagshaw is an economics reporter for the Sydney Morning Herald and The Age, based in Parliament House