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Tuesday, 24 March 1987
Page: 1387

Mr PETER FISHER(4.04) —This matter of public importance emphasises the deteriorating economic and social decline in the rural communities and how serious a threat is imposed upon the living standards of all Australians, with its potential to reduce our productive capacity and export earnings. The Hawke Government has shown a lack of understanding of rural issues. Its rhetoric and actions display enormous ignorance and a lack of compassion for agricultural industries. The Government refuses to change policy direction to cut interest rates and reduce the massive burden of costs, particularly the greed of taxation on our petroleum products. The Minister for Primary Industry (Mr Kerin) may know that these changes are necessary, but the philosophy of the Australian Labor Party makes him a lame duck. He can only repeat ad nauseam that the future of agriculture depends on getting the economy right-and he has been at it again today.

With the decline in export earnings and the criminal escalation of our national debt the future in rural Australia is bleak. The major farm economic statistics are stark. Average per farm business debt is $74,000 and for wheat farmers it is an average of $135,000. Of course, in many cases it is much higher. Average farm income is only $16,400, but on wheat properties in 1986-87 incomes will be only $1,200. Real land values in the wheat zone are down by 39 per cent. The real rate of return, including capital depreciation, is minus 12.1 per cent, and 12.5 per cent of wheat growers will have a net income loss of $60,000. In New South Wales a staggering 53 per cent of all wheat farmers are at risk and in Western Australia, in my electorate of Mallee, there are high levels of debt and high risk factors involved. The Government refuses to do anything about interest rate or cost structures. The Government must act immediately to change its rural adjustment scheme to alleviate the effects upon the social fabric of our communities. The object of RAS should be to enhance the viability of country centres by maintaining agricultural industries.

The current rural crisis affects not only the primary producer but the entire rural economy, including small businesses in country towns. Rural services, hospitals and schools are already feeling the pressure of the current economic downturn. Allowing large numbers of primary producers to become bankrupt will have a devastating national, social and economic effect, as well as cause a loss in crucial export income of such farmers. There will be a vast increase in social welfare costs to support producers who are forced to have their properties removed from them. The nation simply cannot afford a further drift from rural Australia.

At a time of record indebtedness in the rural sector it is tragic that government funding to assist rural construction and adjustment is at relatively low levels. Since 1975-76 the Commonwealth under a coalition government provided assistance to the States for the purpose of a rural adjustment scheme embracing debt reconstruction, farm build up, farm improvement, carry-on finance and household support. Under revised financial arrangements, introduced on 1 July 1985 by this Government, assistance for debt reconstruction, farm buildup and farm improvement is provided by the Commonwealth as an interest subsidy of 50 per cent for a maximum of seven years on funds raised from commercial sources. Similarly, carry on finance is provided as a 50 per cent interest subsidy on commercial borrowings for a maximum of seven years, but with the costs shared equally between the Commonwealth and the States.

I remind policy makers in this Government that the moneys provided to rural adjustment used to be on a basis of low interest and long term loans. The Government has announced that it will increase assistance under the scheme through the interest subsidy proposals, but the amounts available to rural assistance are not large. In 1978-79, in a time of national difficulty, $47m was made available for rural reconstruction. A quick examination of the $34m appropriation this year shows that it is not high by any standard. A large proportion of the Government's appropriation to rural reconstruction has been and is being funded-I emphasise this point-by repayment of existing loans. The rural debt is now approaching $12 billion and therefore it is of concern that government outlays for rural assistance have not been increased to match the enormity of the problem. The total Federal Budget outlays for 1986-87 were $75 billion, but government outlays for rural assistance, after interest and repayments are taken into consideration, are negative for this year. The rural adjustment scheme must be made more flexible. Eligibility must not have as its determining factor the amount of funds available.

Mr McGauran —It is unjust.

Mr PETER FISHER —The viability of farmers, as the honourable member for Gippsland said, should not be based solely upon the debt equity approach but upon the production potential and the importance of the rural sector to Australia. Assistance must be even-handed, fair and politically acceptable to all sectors of rural Australia. The coalition has given urgent consideration to this issue and recommends urgent changes. The Government, for instance, must increase rural adjustment scheme funding. As an example, under part A of the scheme the maximum interest rate subsidy in New South Wales has recently been increased to $10,500. However, without an increase in appropriations, New South Wales will be able to increase the level of assistance per applicant only if it also is prepared to accept a reduced number of beneficiaries. The same situation applies across Australia.

Increased funding can be justified as, over recent years, the Commonwealth Government has subsidised such industries as the car, housing and steel industries. The steel industry has received a total of $358m and a maximum yearly subsidy of $71.6m. Despite the Minister's protestations, interest rates are the single most important factor crippling primary producers. At present, average interest rates for primary industry and small business are running at 20.25 per cent and up to 23 per cent on a net basis to the borrower. Hire purchase and lease arrangement rates range from 24 per cent to 27 per cent.

Mr Cobb —It is killing them.

Mr PETER FISHER —It is killing the bush. The current subsidy available to producers is worth approximately 5 per cent, bringing rates down to only 15 per cent. Many of the most affected farmers are young, well-educated and technically advanced operators who have recently entered the industry. These farmers are the most viable future primary producers and need special assistance, given the negative affects of the deregulation of the financial system. Part B of the rural adjustment scheme should provide carry-on finance to industries suffering a severe market downturn or similar situation. Clearly, the current crisis in the wheat industry should come under part B. However, few funds are directed towards part B carry-on payments and this must be rectified. Obviously it is a grave weakness of any assistance scheme if carry-on funds at appropriate interest rates are not available or adequate.

There are current guidelines in the rural adjustment scheme for household support to assist unviable producers to leave the industry. Given the difficult economic situation of many producers, a better assessment scheme should be available for part C applications. It is my view that an additional rehabilitation package must be made available for farmers who are forced to adjust out of the industry. One important aspect which must be addressed is the continued viability of producers within the industry. Currently, however, there are few objective criteria by which viability is measured. One possibility to improve application procedure and criteria would be a greater use of professional farm assessors and advisers. Applications for assistance could be made by such assessment also providing advice and help in farming techniques. Such assessment would create a long term improvement in rural production and practice and increase current and prospective viability.

The Government, through the Minister for Primary Industry, must address the question of the sharing of risk, which is currently limited to seven years. Loans which are made beyond seven years do not attract any Commonwealth support. Producers must have a realistic opportunity for trading out of the current economic situation, which inevitably will take longer than seven years. Of course, the economic situation in many areas of primary industry remains so serious that it is essential that the private lending institutions take a more active role in maintaining producers.

As I stated in a notice of motion I gave in the House today, the Government must not allow a large section of the population to lose home, heritage and livelihood and there is a need to retain and reallocate in different economic circumstances. It must show some concern for our productive people and stop grinding the average Australian into the dust with costs, interest rates and government taxes and regulations. Government policies have been found wanting and are totally discredited in the eyes of the electorate. A tragedy is taking place in rural Australia with major economic and social implications for the whole nation.

Mr DEPUTY SPEAKER (Mr Mountford) —Order! The honourable member's time has expired.