The drought package announced by prime minister Tony Abbott on Wednesday included “more generous criteria for accessing income support” by drought-affected farmers. Income support is to be paid through an Interim Farm Household Allowance, which replaces a Transitional Farm Household Allowance. The interim scheme will in turn be replaced on July 1 this year by the “permanent” Farm Household Allowance.
This proliferation of programs reflects a fundamental problem that has faced policymakers for decades. How does government deliver equitable and appropriate income support to farmers?
There has been a long series of such attempts. All have suffered from one fundamental flaw: a lack of evidence about the nature, extent and causes of farm poverty in Australia. We simply do not know how many farmers are in poverty or why.
The last time farm poverty was measured was in the early 1970s as part of the Henderson inquiry into poverty. On that occasion, conclusions about rural poverty were drawn on the basis of two small regional surveys. There has been no attempt in nearly 40 years since then to examine and understand the circumstances under which farmers find themselves in poverty.
In the absence of evidence, policy is based on assumptions. When policymakers assume that sub-optimal rates of structural adjustment (that is, farmers are slow in responding to market signals) result in low farm incomes, the solution is support linked to farm exit and/or providing assistance as a loan. When the assumption is that low incomes are due to drought, only farmers in drought-affected areas are supported. This creates potentially serious inequities with farmers with low incomes outside drought-declared regions.
Similarly, if the assumption is made that farmers cannot access support available to other members of the community because of the value of their assets, then the assets test is eased, as is the case with this week’s announcement.
The deserving and the undeserving poor
An important theme in the poverty literature is that of the “deserving” and the “undeserving” poor. This dates back to Elizabethan times and reflects a moral judgement about the personal virtues or shortcomings of those in need. This attitude can be seen to some extent in modern Australia (although this very judgemental language is not used) through activity tests and, to some extent, assets tests that require people to draw on their own resources before making claims on the state.
In these terms, farmers are clearly considered to be among the “deserving” poor. The image of the rugged, self-reliant farmer is a powerful one; farmers perpetuate this idea through a reported reluctance to seek welfare support. Abbott played to this with his reference to drought relief being a “hand-up” not a “hand-out”.
Farmers also enjoy a high level of community respect. There is strong public support for providing assistance. The community has responded generously to images of struggling farmers through donations to various appeals to support drought-affected farmers.
In 2009, an ANU Poll found that nearly two-thirds of those surveyed believed that farmers should receive more or much more assistance from government. Few are prepared to suggest that low farm incomes are the result of personal failings on the part of the farm family or poor business management by the farmer.
A notable feature of the series of farm welfare programs introduced to date is that farmers’ eligibility for income support is linked to their identity as farmers. This distinguishes the policy approach from that towards the rest of the community where individual circumstances are what matter.
Developing an evidence base
There is a clear need for some comprehensive empirical research into the nature and extent of low farm incomes. This means actual income available for meeting the needs of the farm family, not after-tax incomes, which can be understated as a result of business-related tax deductions and depreciation.
A fair welfare program would take complete household income into account. It needs to consider other income flows into the family – as the Henderson inquiry noted, perquisites are available to farm families. These provide in-kind income unavailable to non-farmers and yet are relevant to the family’s subsistence.
Understanding the nature of farm poverty and its causes will then assist in the development of appropriate, effective and equitable policy.
If there are small pockets of poverty affecting relatively few families, the solution may be adjustments at the margins of existing welfare programs – for example, the exemption of farm assets from the assets test. If the problem is widespread but episodic, such as in the case of drought, separate programs may need to be developed but close attention must be paid to developing triggers for relief that are based on individual circumstances.
Whatever the situation, it is proposed that the yardstick for support should be equitable treatment with other low-income groups in the community.
One of the criticisms of this week’s drought package has been its stop-gap nature. The long-standing National Drought Policy appears to have been abandoned and the Abbott government has been faced with the imperative to respond to drought without a long-term framework in place.
It has been suggested that a long-term strategy for drought preparedness, risk management and response will be incorporated in a forthcoming White Paper on Agriculture, for which an issues paper has been released for public comment. This presents an ideal opportunity to undertake research into farm incomes to ensure that future welfare programs are targeted, timely and equitable – both between different groups of farmers and between farmers and the rest of the community.