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Thursday, 4 June 1987
Page: 4058

(Question No. 5129)

Mr Wright asked the Minister for Primary Industry, upon notice, on 23 February 1987:

(1) What funding has been made available to Queensland in each year since 1977 through the Rural Adjustment Scheme and the Rural Reconstruction Scheme.

(2) Is he able to say what proportion of these funds has (a) been made available by the Queensland Government to primary producers, (b) been transferred to Consolidated Revenue or (c) not been lent to primary producers as agreed.

(3) Is it a fact that the Government makes these funds available to the Queensland Government at an 8 per cent interest rate.

(4) Is it a fact that the Queensland Government is only required to repay 85 per cent of loans, with the remaining 15 per cent being for alleged bad debts.

(5) Is it a fact that the Queensland Government is not required to pay interest during the first 3 years of the loan period.

(6) Has his attention been drawn to claims that the Queensland Government is receiving Federal funds, not at 8 per cent, but because of the special conditions, at closer to 4 1/2 per cent, and is lending that money to primary producers at approximately 15 per cent.

(7) What powers does the Government have to (a) provide loans direct to primary producers and (b) require the Queensland Government to use the money for the purposes stated in the original Rural Reconstruction and Rural Adjustment Scheme agreements.

Mr Kerin —The answer to the honourable member's question is as follows:

Since 1977 there have been changes to the schemes which have provided funds for rural adjustment. The following reply to the honourable member's question is provided in two parts. The first covers the Rural Adjustment Scheme (RAS) which was in place from 1 January 1977 to 30 June 1985. That Scheme replaced the Rural Reconstruction Scheme and was based on the Commonwealth providing funds to the States for on-lending to primary producers. From 1 July 1985 a new RAS was introduced under which the Commonwealth provided a 50 per cent subsidy on interest rates for loans taken out by either State rural adjustment authorities or farmers.

(1) Under the 1977-1985 RAS funds could be used for the following purposes:

Part A: debt reconstruction, farm build-up, farm improvement, rehabilitation.

Part B: carry on finance (jointly funded with the States), and

Part C: household support.

Between 1 January 1977 and 30 June 1985 the Commonwealth provided the following funds to Queensland.




1977 (January to June)...




















From 1 January 1977 to 30 June 1985 Queensland provided $19.8m to the RAS for Part B assistance to the sugar and beef industries.

According to its 1984-85 Annual Report the Queensland Rural Reconstruction Board which administered the RAS, had made payments to primary producers of $77.6m under the Scheme to 30 June 1985. Two million dollars had been credited to State Consolidated Revenue.

The Queensland Rural Reconstruction Board operated a Rural Reconstruction fund for the purposes of the Rural Reconstruction Scheme and a Rural Adjustment Fund for the purpose of the Rural Adjustment Scheme and similar schemes. The balance in the Rural Adjustment Fund stood at $19.6m and the balance in the Rural Reconstruction Fund stood at $19.2m on 30 June 1985.

Part A funding was provided by Commonwealth loans (85 per cent) and grants (15 per cent). Before 1982 the loans were made at 7 per cent interest for 20 years. From 1982 interest on Commonwealth loans and outstanding balances was raised to 8 per cent. The States were not required to make any repayments for the first four years of a loan. The grant component was provided to cover losses on loans to farmers, asset write-offs and the conversion of loans to grants.

Part B carry-on finance was jointly funded by the Commonwealth and the State on a dollar for dollar basis. The Commonwealth generally made funds available at 4 per cent, repayable over 7 years with a 12 month repayment holiday. Funds lent to Queensland at 4 per cent were provided to Queensland beef producers at 4 per cent.

The agreement allowed the States to determine the interest rate which they charged farmers and obliged them to return recipients to commercial interest rates as soon as possible. Thus older borrowers who were judged commercially viable would have been paying commercial interest rates. Funding for household support (Part C) was provided to the States as a loan but only those loans repaid by household support recipients were repayable to the Commonwealth. Household support payments could have been converted from loans to grants as the State decided.

(2) The funding arrangements changed from 1 July 1985 and since then the Commonwealth has provided grants under Part A to subsidise loans taken out by the State or farmers for debt reconstruction, farm build-up and farm improvement. The subsidy is equivalent to 50 per cent of the interest rate of a nominated commercial lender on the amount of borrowing the Commonwealth decides is appropriate after consultation with the States. The nominated lender for 1986-87 is the Primary Industry Bank of Australia and the nominated interest rate is 17.5 per cent.

Part B funding for carry-on finance is jointly subsidised by the Commonwealth and States with the Commonwealth providing a 25 per cent interest subsidy. Household support and rehabilitation are funded on the same basis as in the previous scheme.

The Commonwealth provided $1.03m RAS funding to Queensland in 1985-86 ($0.54m for Part A, $0.44m for Part C and $0.05m for administration costs) and Queensland approved $8.4m of assistance. In 1986-87 the Commonwealth will provide an estimated $5.06m of RAS funding to Queensland comprising $4.02m for Part A, $0.75m for Part C and $0.29m for administration costs.

Because of these new arrangements the Queensland Government is currently receiving Part A RAS funding as grants rather than loans. It is, in general, applying these funds so as to reduce an applicant's interest rate by around six per cent.

The Commonwealth has the power to provide loans directly to primary producers but it is more efficient and less costly to use established State organisations to administer the RAS.

The Rural Reconstruction Scheme and 1977-85 RAS agreements allow the States to retain any surpluses generated by the operation of the schemes and do not require these funds to be used for rural adjustment purposes. Queensland has operated the schemes in accordance with the agreements.