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Monday, 19 September 1994
Page: 868

Senator BURNS —I direct my question to the Minister for Primary Industries and Energy. As the minister would be aware, there has been considerable media coverage in the past few weeks of the profound social consequences of the worsening drought for farmers, their families and their communities, particularly in the hardest hit states of New South Wales and Queensland.

Senator Tierney —It has taken you four years to find out.

Senator BURNS —I found out more than you.

  Opposition senators interjecting

Senator BURNS —Are those opposite not concerned about the farmers in trouble?

The PRESIDENT —Order! Do not be baited. Get on with the question.

Senator BURNS —This coverage is understandable, and I am sure it is welcomed by all senators as it brings the plight of rural communities affected by drought to the notice of urban Australians. However, there has been very little reported about the wider economic implications of the drought. Can the minister advise the Senate whether the government has been advised of the potential economic impact of the drought on the rural sector and the general economy?

Senator COLLINS —I thank Senator Burns for his question. I say to Senator Tierney that Senator Burns is chairing the Senate committee that at the moment is inquiring into RAS. As a result, Senator Burns has a close interest in this entire issue.

  Farming in Australia has never been easy, but for about 12,000 out of a total of 125,000 farming families in Australia it has never been tougher than it is at the moment. In fact, in parts of Queensland we have to go back to 1911 before we can find a comparable period of extended drought.

  Core areas of Queensland and New South Wales have now been laid waste by extreme drought, directly affecting at this stage, as I have said, about 12,000 of Australia's 125,000 farming families. I regret to say that the drought has stalled what would otherwise have been a strong recovery in the rural sector. One only has to look at the wool price which, on its own, has put about $1 billion back into the rural equation, to see the truth of that.

  ABARE has provided an analysis of the drought's effects on farm incomes and the economy. I met with ABARE last week on this issue. The severity of the Queensland-New South Wales drought is most clearly demonstrated when one looks at the likely financial position of droughted farms. Average farm cash income for broadacre farms in Queensland in 1994-95 is expected to fall by around 15 per cent to just over $33,000, with an estimated 38 per cent expected to suffer negative income.

  In New South Wales, average farm income is expected to fall by 56 per cent to just over $19,000, with 26 per cent of farms expected to have negative incomes. Hardest hit will be the crop and beef industries, although the dry conditions are also now having an adverse impact on the quality of this season's spring lambs with saleyard prices expected to fall as a result.

  ABARE estimates that the drought has cut total Australian winter crop production, including wheat, barley, legumes and so on, by 40 per cent to around 17 million tonnes in total. The drought will result in a reduction in the net value of agriculture production of around $1.3 billion in 1994-95, with a forecast loss of about $450 million in exports.

  The volume of rural exports is forecast to decline by around six per cent but this is expected to be largely off-set by higher commodity prices. On balance, the value of rural commodity exports is forecast by ABARE to be around $19.1 billion this financial year, which is largely unchanged from 1993-94. As I have said, a lot of that can be attributed to the increase in the price for wool alone. The reduction in Australia's national income as a result of the drought is estimated at around $2 billion, equivalent to a drop of half a percentage point in the economic growth this financial year.

  There has been considerable media speculation about the effects of drought on consumer prices. Mr President, the drought may increase the price of fruit, vegetables, lamb, pigs, poultry and cereal, but beef and mutton prices can be expected to fall in the short term. ABARE has, in fact, advised me that significant inflationary pressures are unlikely as a result of the drought, given the presence of considerable spare capacity in the Australian economy.

Senator BURNS —Mr President, I ask a supplementary question. Can the minister advise the Senate upon what assumptions the ABARE analysis is based?

Senator COLLINS —Mr President, the forecasts I have just given are based on two assumptions: that the drought will persist in Queensland and New South Wales to the end of this year and will be followed by a poor and late summer rain consistent with the El Nino phenomenon; and that the remaining states will receive below average rainfall this spring. Given that the drought is on-going, the actual impact on the Australian economy will depend in part on the extent of the final reduction in farm production. It is obvious that, in this sense, the only solution to the drought is rain.

  However, the wider Australian community, I must say, is responding magnificently to the plight of the worst hit farmers through the national Farm Hand appeal, which the Prime Minister has pledged to match dollar for dollar. The Prime Minister clearly articulated this government's position during his trip to droughted areas in Queensland this year, when he said that the government will respond positively to this crisis. Indeed, I will be taking a submission to cabinet this Wednesday on the matter.