Australia’s drought relief package hits the political spot but misses the bigger point

There are two basic components to the Morrison government’s latest A$1 billion package response to the drought affecting large parts eastern Australia. One part involves extra subsidies to farmers and farm-related business. The other involves measures to create or upgrade infrastructure in rural areas.

All the indicators from climate science is that rain
 in many areas will be even more unreliable in the future.

Unfortunately, most funds will be misdirected and the response is unlikely to secure the long-term prosperity of regional and rural communities. This is a quick fix to a political problem, appealing to an important constituency. But it misses the point, again, about the emerging economics of drought.

The bulk of the A$1 billion package is allocated to a loan fund. The terms of the ten-year loans are more generous than what has been offered in the past. They are now interest-free for two years, with no requirement to start paying back the principal till the sixth year. 

Farmers will be able to borrow up to A$2 million. In addition, loans of up to A$500,000 will also be available to small businesses in drought-affected towns. 

Read the story from The Conversation by the Professor of Economics and Head of School from the University of South Australia, Lin Crase - “Australia’s drought relief package hits the political spot but misses the bigger point.”