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Thursday, 2 December 1976

Mr SINCLAIR (New England) (Minister for Primary Industry) - I move:

That the Bill be now read a second time.

The purpose of this Bill is to provide parliamentary approval for the execution on behalf of the Commonwealth of an agreement between the Commonwealth and the States for a rural adjustment scheme. The details of the scheme are set out in the agreement which is contained in a schedule to the Bill and in a schedule to the agreement.

This scheme has emerged from recommendations of the Industries Assistance Commission which conducted an inquiry into the broad issue of reconstruction and adjustment in the rural sector. The proposals of the Industries Assistance Commission have been the subject of a series of meetings between the Commonwealth and the States at both official and ministerial level. The scheme combines the various forms of rural adjustment at present provided under separate legislation, namely the rural reconstruction scheme, the dairy adjustment program and the carry-on scheme for beef producers, into one comprehensive scheme. The scheme also introduces a new form of assistance called household support which, for the first time, will extend help to those farmers, who have exhausted their cash and credit, while they consider whether or not to move out of farming.

Rural industries prosper or decline as technology changes, as buying patterns of export markets change, and as currency values vary. Much of the adjustment which is necessary to the long term economic situation in the rural sector has occurred, and will continue to occur, autonomously. The Government believes however that it has a responsibility to assist the adjustment process by providing the financial means to ensure that resources continue to be used in those industries, where their earning power is greatest and, at the same time, provide welfare assistance to those farmers so seriously affected by circumstances that they are unable to remain in the industry.

It is an historical fact that the percentage of Australia's work force employed in the rural sector has decreased significantly in recent years. The number of farms has fallen and their average size has increased. Economic circumstances have required farmers to amalgamate, diversify, and vary the proportion of their various inputs. This has meant that while some farmers were able to remain and develop more profitable enterprises others found it necessary to transfer to other employment.

Two of the forms of assistance available under the existing rural reconstruction scheme to assist farmers who are potentially viable are to be continued in this new scheme. Debt reconstruction assistance is designed to help the applicant whose prospects are sound but who is unable to obtain finance to carry on and is thus in danger of losing his property or other assets. The assistance may provide for a rearrangement or composition of debts to allow more time for payment. Money may be advanced for repayment of all or part ofthe debts and for carry-on expenses, livestock and further property development.

The farm build-up provisions are designed to encourage amalgamation of properties which are too small to be economic under current conditions. Finance may be provided either to the owner of an uneconomic property to buy adjoining land to build up his property, or to an adjoining owner to enable him to purchase an uneconomic farm. Grants may be made at the discretion of the State administering authority to cover, in whole or in part, losses sustained in the disposal of assets included in the purchase price of the property which are not useful for the built-up property. Under the dairy adjustment program, assistance is available for the restoration of an uneconomic property to economic viability by improving the effective use of an existing farm without adding to its area. Assistance of this kind will be extended to the whole farm sector under the farm improvement provisions of the rural adjustment scheme. To be eligible for such assistance the applicant must be in the position where he is unable to obtain finance on reasonable terms from any other normal source. He must also be able to demonstrate that his existing farm has been, but is not now, viable, that the property is of sufficient size and the proposed improvements are of such a kind as to offer sound prospects of restoration to long term commercial viability if assistance under this scheme were provided. Farm improvement assistance may take the form of advances for plant, livestock, carry-on expenses and further property development intended to restore the economic viability of the farm, either in the existing form of production or in another form of production. Grants at the discretion of the State authority may be made to cover, in whole or in part, losses sustained from the reduction in value of assets which are either not useful or are less useful because of the changed pattern of farm operation. Such grants will be kept to a minimum and will be made only where the changed pattern of farm operation is, in the opinion of the authority, essential to the restoration of long term commercial viability.

Assistance for debt reconstruction, farm buildup and farm improvement will take the form of loans on such terms and conditions, including interest rate, as the State authority considers appropriate. The maximum repayment term will be 30 years. State authorities administering the scheme will have the right to review the interest rate on individual accounts at any time. They are required to review the terms of repayment including interest rates at regular intervals with the objective of encouraging the borrower to transfer to commercial credit as soon as circumstances permit. There are occasions when a particular rural industry encounters a severe market downturn or similar eventuality and assistance is required to enable many of its producers to carry on pending the recovery of the industry's fortunes. If such assistance is not available many producers, particularly young men getting themselves established, suffer permanent financial damage and the country's productive capacity suffers along with the individual. The events which have occurred recently in the beef and dairy industries provide examples of this situation. It was therefore decided that the rural adjustment scheme should include a standing faculty to enable loans to be made for essential carry-on purposes in times of severe market downturn or similar situation, but excluding circumstances covered by natural disaster arrangements, in those rural industries where the Commonwealth and States agree from time to time that it is necessary. It is, of course, true that as far as natural disaster arrangements are concerned, there is a separate facility available to the States to provide the specific help needed. They are backed up by the Commonwealth according to a formula which has been explained on many previous occasions in the Parliament.

The Commonwealth and the State will agree on the terms and conditions of the assistance to be provided in particular circumstances and the facility will be activated by notice to that effect in the Commonwealth Gazette. Carry-on assistance available at present to beef producers and dairy farmers under industry schemes will be continued from 1 January 1977 under the terms of the new rural adjustment scheme. As I said earlier, the carry-on assistance is designed to assist the producer who has reasonable prospects of long term commercial viability. In making its assessment of the applicant, the State administering authority will have regard to the farmer's asset structure and will make its assessment on the assumption of a market recovery to the long term trend. The applicant must also be in a position where he is unable to obtain carry-on finance on reasonable terms from any other normal source.

Household support is a new form of assistance designed to provide help for up to one year to farmers who are judged to be non-viable and who have insufficient resources to meet living ex- penses and who are in need of assistance to alleviate conditions of personal and family hardship while the farmer considers whether to adjust out of farming. A farmer will be eligible for such assistance if he is assessed by the administering authority as being non-viable in the long term, is unable to obtain financial assistance from any other normal source and will suffer personal and family hardship if not assisted. Assistance will be provided for a period of up to one year sufficient to raise the applicant's estimated future net income from all sources to the level of payment which would be applicable to him if he were eligible for unemployment benefits. In those cases where a demonstrable effort has been made to move out of farming an extension to 2 years may be allowed at the discretion of the administering authority. Advances are to be paid to the farmer at intervals decided by the authority but not longer than 3 months. Prospective income for each period will be assessed by the authority on the basis of a declaration made by the applicant.

Where it would take some time to assess an applicant's entitlement interim assistance may be granted by the authority as a loan provided there is prima facie evidence of urgent need and unavailability of alternative sources of finance. If the authority subsequently determines that the applicant has a viable enterprise, the interim assistance will be regarded as carry-on finance and would, of course, be repayable. At the end of the first period of 6 months for which a farmer receives household support, the assistance he receives may be converted to a grant. If the farmer adjusts out of farming within 3 years of the time he first received household support, any advances made to him and not already converted to a grant may be so converted. If he does not adjust out of farming within 3 years of first receiving assistance any advance made to him and not already converted to a grant will be repayable to the Authority.

A farmer who is eligible for household support and who is prepared to adjust out of farming may, at the discretion of the authority, receive in lieu of household support assistance, a lump sum payment of $3,000 less any household support assistance paid to him prior to adjusting out of farming. For the purposes of the household support provisions of this scheme, a farmer will be regarded as having adjusted out of farming when, in the judgment of the authority, he has effectively disposed of his productive resources. The other form of assistance provided to farmers who are judged to be non-viable and are obliged to leave the industry is rehabilitation assistance. Such assistance is provided at the discretion of the administering authority and may be converted to a grant also at the discretion of the authority. The authority must be satisfied that the applicant will suffer financial and personal hardship if not assisted under this provision. The maximum loan will be $5,000. Eligibility for rehabilitation assistance is not affected by the farmer having already received assistance under the household support provision.

The rural adjustment scheme is essentially a joint Commonwealth-State operation. Broadly the Commonwealth will provide the funds for the scheme while the States will be primarily responsible for the detailed adminstration of it in accordance with policies agreed between the Commonwealth and the States. Funds for the general components of the scheme, that is debt reconstruction, farm build-up, farm improvement and rehabilitation will be advanced by the Commonwealth to the State; 85 per cent in the form of a loan and 15 per cent in the form of a grant. The loan component will attract interest at the rate of 7 per cent per annum initially, although this is subject to review if the long term bond rate changes substantially. The loan component will be repayable over 20 years including a 3 year principal repayment holiday. The funding of household support will be the responsibility of the Commonwealth. Carry-on assistance will be funded on a cost sharing basis between Commonwealth and States to be agreed on each occasion that the facility is used. The existing 50/50 cost sharing arrangement between the Commonwealth and the States will be maintained for dairy and beef carry-on assistance at least until 30 June 1977.

The Commonwealth will share equally with the States administration costs up to 2 per cent of the value of approvals in each year for all forms of assistance, except carry-on, the administration costs for which are included in the cost sharing arrangements. The financial assistance to be provided each year for debt reconstruction, farm build-up, farm improvement and rehabilitation, will be determined by the Commonwealth before the commencement of the financial year after a meeting of Commonwealth and State Ministers which will review the circumstances relating to the financial year and consider submissions made by the States. The amount to be made available by the Commonwealth to a State for the purposes of carry-on assistance will be determined at the time that the Commonwealth and the States agree that the provision of such assistance is warranted. Household support assistance will not be subject to prior allocation of funds. States will recoup from the Commonwealth funds used for this purpose.

For the period 1 January to 30 June 1977 the Commonwealth Government has agreed to provide for a total approvals program of $20m for debt reconstruction, farm build-up, farm improvement and rehabilitation purposes. Individual State allocations are New South Wales $5.6m, Victoria $4.75m, Queensland $3.4m, South Australia $2. 75m, Western Australia $3.25m, Tasmania $250,000. This approvals program will be reviewed by the Commonwealth and the States in February 1977. Beef carry-on and dairy adjustment funds not committed at 3 1 December 1976 will continue to be earmarked for these purposes. The assistance measures provided for in this Bill have been subject to rigorous examination. I believe they are economically justifiable and socially desirable. The scheme will be subject to review annually and will undergo a major review in 4 years time. It might be worth while my stating that in the interim both the Rural Bank concept and the young farmers establishment scheme may involve some extensions or modifications to this legislation. Those will be adopted only after they have been a matter of some discussion with the States and after promulgation of both concepts in this Parliament and in discussion with those persons who will be affected by or interested in each of the 2 proposals of the Government. The Government will certainly not hesitate to make changes in the scheme where the need for such changes becomes apparent. I commend the Bill to the House.

Debate (on motion by Mr Morris) adjourned.

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