Drought Assistance

ASSISTANCE PROVIDED BY BANKS DURING DROUGHT

The banking sector recognises the seriousness of drought and will continue supporting viable farmers.  Banks recognise that drought is a part of the normal business cycle of farming and understand its impact on farm incomes.

Any bank customer who is worrying about the impact of the drought on their financial position should contact their bank, if they have not already done so.

Banks manage the impact of drought on customers on a case-by-case basis reflecting varying impacts and options available to individual customers.  The financial position of individual customers varies and this determines the options that are available.

Banks have been providing our rural communities with special consideration and understanding during this difficult period by examining a customer’s circumstances on a case-by-case basis. The banks’ drought relief packages provide practical help by giving immediate financial relief to those in most need of assistance and improving prospects for maintaining a viable farming business.

During drought:

• farmers and rural businesses will want to identify and manage all costs that can be deferred in the short-term;
• in some cases, individual banks may, as a short-term measure, typically lend farmers carry-on finance to enable shortfalls in cash flow to be met;
• farmers that already have significant debt need to be prepared to draw on financial reserves such as Farm Management Deposits, investments in managed funds and other forms of off-farm investments;
• in some cases, to help reduce cash outgoings, individual banks may put in place the short-term measure of restructuring existing loans so as to reduce annual debt repayments - this may involve extending the term of a loan or allowing interest-only payments for a period of time.

For customers receiving Federal Government interest rate subsidies, it is the general practice of banks not to increase credit risk margins on loans, where customers comply with usual bank requirements.

Banks have and will continue to work with Governments that provide assistance to farmers and rural communities in times of drought in the form of interest rate subsidies, fodder subsidies, fodder transport subsidies, livestock transport subsides, crop planting grants, general grants, unemployment benefits and Austudy assistance.

SUMMARY OF ASSISTANCE MEASURES PROVIDED BY FEDERAL, STATE AND TERRITORY GOVERNMENTS.

A summary (PDF Document) of the drought relief measures provided by Australian, State, and Territory Governments to assist in response and recovery from drought is available by clicking here.

Below is a brief summary of the main forms of assistance which are provided by the Federal Government, with links for more detail.  The above PDF document link has detail about additional State and Territory assistance measures, such fodder and transport subsidies.

is the Australian Government’s main vehicle for providing assistance to farmers in a region or industry that is experiencing a severe downturn due to a rare and severe climatic or other event.

EC assistance ensures that viable farmers are not forced to leave the land due to events that are beyond the boundaries of normal risk management.  Assistance is available in the form of EC Relief Payments and EC Interest Rate Subsidies. 

EC are events that occur on average once in every 20 to 25 years and have an impact for a prolonged period (e.g. greater than 12 months).

EC declarations are made following an assessment by the National Rural Advisory Council (NRAC).  The State or Territory lodges an application for EC assistance with the Australian Government.

More information on the process by which regions or industries seek an EC-declaration is available in the Exceptional Circumstances Handbook.

Interest Rate Subsidies are available to eligible producers in EC-declared areas.  Subsidies of up to $100,000 per year are available at a rate of 50% of the interest payable on new and existing loans for the first year of an EC-declaration, and up to 80% in the second and subsequent year.  The off-farm assets test threshold for the subsidy is now $458,000 per farm business. Total subsidy payments capped at $100,000 per annum or $300,000 over the term of a declaration. They are funded 90% by Commonwealth and 10% by State Government. State and Territory Authorities that administer the assistance can be found via the following link. Click here for more information.

Exceptional Circumstances Relief Payment is welfare assistance to eligible farmers under national EC Drought assistance administered by the Department of Agriculture, Forestry and Fisheries which is funded by the Commonwealth. The payment provides assistance to farmers living in 'exceptional circumstances' affected areas who are having difficulty meeting family and personal living expenses. Click here for more information.

Interim Income Support is available to areas that have been announced as having a prima-facie case for Exceptional Circumstances (EC) while the State's application for EC is being considered by the National Rural Advisory Council. Click here for more information.

Farm Help

The Farm Help program offers:

• financial assistance to farmers and their families who are experiencing financial difficulties and who cannot borrow further against their assets;
• tailored assistance to farm families to adjust and make decisions about their future in the industry;
• access to professional advice and training to assist farmers to consider their options for the future, to find alternative sources of income or to re-establish themselves outside of farming;
• a re-establishment grant for those who choose to exit farming. 

Click here for more information about the Farm Help Program.

This service is free, impartial, and independent of financial institutions, welfare agencies and government.

It’s up to the client to choose which option is right for them. The rural financial counsellor will help clients develop some options and provide support with their decision making.

Rural financial counsellors can:

• help clients identify financial and business options;
• help clients negotiate with their lenders; 
• give clients information about government and other assistance schemes;                                                       
• refer clients to accountants, agricultural advisers and educational services;                                                       
• refer clients to professionals for succession planning, family mediation and personal counselling, and to Centrelink.

Click here for the location and contact details of counsellors.

 

The Australian Government is providing free personal counselling services in drought affected rural communities. Click here for more information.

September 2006

Internet: www.bankers.asn.au 
Phone: 02 8298 0417  Fax: 02 8298 0402
 

Important note: This fact sheet gives information of a general nature and is not intended to be relied on by readers as advice in any particular matter. Readers should consult their own advisers on how this information may apply to their own circumstances

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