Overhaul farming policy for drought, says Productivity Commission

The Government's key economic advisory agency will release a report today proposing major changes to the Government's Exceptional Circumstances drought-relief system, including a shift from unlimited drought support payments to grants to help farmers improve their ability to withstand future droughts.

The report will also say the existing EC system is dividing communities because eligibility for assistance is given according to arbitrary lines on a map indicating which areas are drought-declared.

The release of the report follows news in The Australian yesterday that the National Farmers Federation had scrapped its long-term support for the EC system.

In its submission to the Productivity Commission's inquiry into drought assistance, the NFF called for adaptation grants for successful farmers and HECS-style loans to help others build their businesses to the point where they can afford to invest in adaptation. The NFF also called for time-limited income support for struggling producers while they considered whether to apply for exit grants to leave the land.

The Productivity Commission's report is the last of three reports commissioned by the Rudd Government when it took office late last year.

A Bureau of Meteorology report released earlier this year warned of more frequent droughts because of climate change, while an expert panel investigating the social effects of drought last week called for an end to no-strings assistance.

Today's Productivity Commission report, a draft ahead of a final report in February, is expected to criticise the design of the EC system, created by the Keating Labor government in 1992.

The report is expected to say that the system does nothing to encourage farmers to change their practices and that the need for adaptation is becoming more serious because of climate change.

It will say the lack of incentives for change encourages farmers whose operations are unprofitable to continue to use bad management practices.

During last year's election campaign, Kevin Rudd promised to spend $55 million on training and re-establishment grants for primary producers, as well as $15million for research into better farming practices and $60million to retrain farmers in better farming practices.

The Productivity Commission report is expected to advise the Government to lift these financial undertakings.

Agriculture Minister Tony Burke was unavailable to comment yesterday, but has previously said any changes would not leave current EC recipients without support.

Opposition agriculture spokesman John Cobb agreed there was a need for reform of the EC system, provided there were proper transitional arrangements to ensure people were not suddenly denied income support.