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Rural adjustment scheme impasse broken



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L MINISTEFI F O R P R IM A R Y IN D U S T R IE S A N D E N E R G Y ll SIM O N C R E A N , M P II CA NBER R A

Wednesday, 26th June, 1991

RURAL ADJUSTMENT SCHEME IMPASSE BROKEN

:>tote^m gi$tei^ for the, Rural:Adjustment Scheme (RAS) said that farmers . suffeiing-:hardship in .the, current fruial..'downturn will have greater access to government

The agreement means that the Commonwealth has the capacity to underwrite up to $1.4 billion of rural debt.

The meeting agreed to: .

* transfer $13.6 million of debt reconstruction and interest subsidy funds in order to meet the states’ concerns that funding would be inadequate in 1991/92 (Part A). * that the states would now match Commonwealth funds intended to keep potentially profitable farms operating (Part B);

* give farmers on unprofitable farms a six month breathing space before deciding ; to leave the farm and still be eligible for household support (Part C), while . ; *; Social Security entitlements for farmers are being examined by the federal , government. ·.

The RAS; is designed· to enable· the long-term restructure of the rural sector through " helping farmety who, are potentially, profitable, but with short-term funding problems, through times of rural downturn.

Part of the package also helps farmers whose farms cannot be restored to profitability to move off the farm.

M r Crean said he welcomed the support of the state ministers on reaching the agreement.

He said it was vital that the scheme have the flexibility to accommodate periods of particular difficulty, such as that being faced by farmers at the moment.

"Governments must recognise the immediate problems facing farmers and be sensitive to them," he said.

. "We must balance this with the longer-term objective of maintaining the longer term efficiency of the farm sector.

"It's in all our Interests - the farmers’ interests, the government’s interests, the finance: sector's interests * for as many potentially profitable farmers as possible to stay on their farms," he said. ' : ’ .

COMMONWEALTH PARLIAMENTARY LIBRARY IvHCAH

"The increased funding availiMe under the crucial part A section of RAS, which helps farmers to improve profitabili ty will be achieved by transferring funds for debt restructuring mcludw in Part B.

Mr Crean said he was particularly pleased that farmers whose farms were judged not to be potentially profitable were to be given a period of grace, during which they can get household support, before undertaking to leave the farm.

"This breathing space means that those states that asked farmers to sign a commitment to leave Ae farm before providing assistance will no longer do so," he said.

Mr Crean recently clarified the assistance available to farmers with the Minister for Social Security, Senator Richardson.

"Statistics show that social security payments are increasing in the bush, and while farmers may be reluctant to seek social security benefits, the feet remains that many are eligible for assistance," he said.

The farmer or spouse can apply for social security assistance, such as unemployment benefits and special benefits, if they meet certain tests (e.g. work, Income and assets tests).

Where their assests exceed the limit, but they cannot reasonable realise or borrow agains : them and they are experiencing genuine hardship, they may be eligible for this assistance under special hardship provision of the Social Security Act.

Mr Crean stressed that whoever was applying for unemployment benefits (either farmer or spouse) must be available, and looking, for full-time work.

At the meeting he told state ministers that the adequacy of existing funding arrangements would be reviewed in October.

"If that review finds there is a need for more money, than I will take that to Cabinet for consideration," he said.

Further inquiries: Barbara Sharp, press secretary, (03) 655 2600

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JOINT STATEMENT

MINISTERS AGREE ON ASSISTANCE MEASURES FOR FARMERS UNDER RURAL ADJUSTMENT SCHEME

Simon Crean, Minister £or Primary Industries and Energy, met with State Ministers responsible tor the management and administration of the Rural Adjustment Scheme (RAS) in Melbourne today.

The m ain purpose of the meeting was to agree on a range of

measures under the RAS to most effectively support the rural sector in the present downturn and stimulate its recovery as commodity prices improved.

Ministers discussed the rural downturn and while they agreed that there were some signs of a recovery in wheat prices and the wool

situation was more hopeful, they noted that the latest forecasts from ABARE confirmed that farm incomes would continue to be depressed during the coming new financial year.

The meeting re-affirmed that the Commonwealth and State Governments will provide support to farmers by providing the appropriate assistance packages to those farmere facing or experiencing financial difficulties. This does not mean that the RAS will be used to bail financial institution· out of non­ performing loans resulting from injudicious lending practices or keep farmers on the land who have little hope of a return to

profitable operation.

Ministers considered funding requirements for 1991-92 'and agreed that the $13.6a of Commonwealth funding allocated in the Commonwealth rural assistance package announced in April 1991 for short-term debt re-construction with interest subsidy (DRIS)

should more appropriately be contained in the structural adjustment component or the RAS i.e. Part A rather than the carry-on component (Part B ) . This would more than double the level of new structural adjustment funding (Part A) for 1991-92

from $12.2m to $25.8m. This amount will support some $350m of rural d e b t .

The new arrangements propose 2 year funding for the DRIS component as distinct from the normal 7 year Commonwealth funding arrangements applicable to Part A.

The adequacy of funding for Part A will be reviewed in October allowing an assessment of the demand for funds over the first thr e e to four months of the year. At this time the 2 year term

applicable to DRIS will also be reviewed. State Ministers expressed the view that recovery was longer term rather than short tens and a commitment from the Commonwealth for ongoing funding will be required.

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State Ministers also agreed to activate the carry-on funding provision· of the HAS (Part B ) , for which the States and the

Commonwealth each contribute 30% of the funding, on a State by State basis depending on their particular circumstances and n e e d s .

this agreement did not extend to the question of Part B drought funding where a number of Sates have submitted applications for such funding. This will be pursued by the individual states concerned. Further discussions on drought policy will occur at the Australian Agricultural council in August.

Mr. Crean raised as a matter of concern the maintenance of farmers income levels in the current downturn and how the RAS could assist those farmers faced with a decision on whether to stay in farming or leave the land. Ministers noted that

although many fanners were eligible for social security benefits, there were cases where farmers were excluded through assets tests or other provisions.

State Ministers expressed concern that the adjustment aspects of the Scheme should not be compromised but agreed that tor the six months from 1 July 1991 to 31 December 1991, farmers applying for household support assistance would not now be required to make a written declaration they they intended to leave farming. They wou l d still, however be required to demonstrate that they had p o o r prospects of a return to profitability and if they did not

leave the land, the household support payments advanced would have to be repaid. During these six months, Mr. Crean would be

discussing the position of farmers with respect to social security payments with the Minister for Social security, senator Richardson.

The problem of farmers wishing to exit fanning but being unable to sell their properties in the present depressed land market was discussed by Ministers. It was agreed that Commonwealth and State officials should meet to examine this question and report

back to Ministers on ways and means by which farmers in this

position could be assisted through the RAS,

Contact: Alan Burden - Telephone: (06) 2724878

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