Heat and dust: the misery of the Australian drought

It's not every day a national capital goes up in flames, but then it's not every day that a developed country faces a drought like the one currently being experienced in Australia. Janine Mace reports on an Australian summer that its inhabitants will be hard-pressed to forget

While images of Canberra being reduced to ashes were beamed around the world, behind the news is a grimmer picture of an unrelenting drought that is proving to be the worst in 100 years. Raging bushfires are just a symptom of the severe impact the drought is having on the farming community and, in turn, the Australian economy. Estimates are that two in every three farms in Australia are now drought stricken, with 99% of the most populous state, New South Wales, now in drought or considered marginal.

Over the past few years, Australia enjoyed the tag of �miracle economy� as it grew strongly at around 4% despite the global downturn, but the creeping impact of the drought is now starting to bite. Sharp declines in agricultural production are leading to falling exports. While the nation no longer �rides on the sheep�s back� for its prosperity, agriculture still plays an important role in generating export income.

Domestically, prices for fruit and vegetables are rising, pushing up the Consumer Price Index and putting pressure on the Reserve Bank of Australia�s inflation targets. While the Commonwealth Government remains upbeat with the treasurer, Peter Costello, noting that �the Australian economy continues to outperform the major industrial economies of the world despite the substantial drag on growth from the drought�, most economists are less optimistic.

Executive director of the Australian Bureau of Agricultural & Resource Economics (ABARE), Dr Brian Fisher, estimates the drought will reduce the rate of economic growth in Australia in 2002-03 by around 0.75% from what would otherwise have been achieved. �The drought will have a significant impact on economic growth through the direct and indirect linkages between agriculture and other industries,� he says.

The impact in dollar terms is stark. ABARE is predicting earnings from farm exports of around $27.1bn this year, a 13% decline from the $31bn in 2001-02. Lower production caused by the drought will be particularly severe amongst grain commodities such as wheat, barley and canola. Summer crop production has also been poor, with the area sown for cotton down 45% from last year and rice crops reduced by 70%.

And the bare statistics hide the human impact, with rural communities around the country facing up to a devastating decline in income. According to National Farmers� Federation President, Peter Cornish, farmers are currently in the grip of one of the severest droughts on record.

�In many areas of Australia this drought is the worst in living memory,� he says. �Right around Australia, farmers are having it tough. While many did have a good season last year, there are also areas that missed out and have not had any decent rain for several years now.�

The impact of the drought is also extending beyond the farm gate into regional and rural communities. Small businesses across the country are increasingly jeopardised by the downturn in regional economies.

�As the drought tightens its grip on Australia it is not just farmers who feel the impact,� Cornish says. �Other people, such as small business owners, farm workers or contractors, will have their income impacted upon and, in some cases, find themselves out of work as a consequence of the drought.�

NSW Farmers� Association President, Mal Peters, also paints a bleak picture, claiming Australia is facing an economic, social and cultural catastrophe.

�The feedback we are getting from people on the ground is that many are near breaking point,� he says. �Farmers and rural communities are facing an immediate and severe cash crisis.�

His organisation is estimating drought will slash average farm incomes in NSW from $96,000 to $10,000 this financial year, with the average Australian broadacre farm to make a loss of $54,000.

Anecdotal stories of farmers committing suicide and rampant despair have seen health authorities rush to assist with personal counselling services and information kits. Toll free 24-hour telephone services are being set up to support the mental health of those affected by the drought.

The Commonwealth Government has also taken action, with federal assistance currently totalling around $1bn. Additional funding is also provided at an individual state level.

While keen to be seen helping, the Government at all levels has been far from slavish in providing handouts to the farming community, with most being very specifically targeted. This in turn is causing resentment amongst farmers and complaints by those excluded.

Before financial assistance is made available, farmers need to qualify for �exceptional circumstances� by experiencing a once in a 25-year event (based on meteorological data) that has persisted more than 12 months and has significantly reduced farm income. Once deemed to be in �exceptional circumstances�, farmers who pass income and asset tests can receive the same welfare safety-net assistance available to the unemployed.

Farmers can also apply for business support. This provides a capped 50% interest rate subsidy to those able to prove they operate an otherwise viable business, but who are unable to meet interest commitments because of the drought.

Despite the initiatives, farm groups like the NSW Farmers Association are demanding more help. �Both the federal and state governments have taken steps to assist farmers, and these initiatives are welcome, but we now need a one in a 100-year solution for a one in a 100-year disaster,� Peters says.

There is also growing concern about the ability of some farmers to recover from the drought, particularly when it comes to loss of core breeding stock on sheep and cattle properties. Although many farmers have been hand-feeding stock for months, spiralling costs are forcing a reassessment, even for key breeding animals.

Meat and Livestock Australia has predicted that the drought will kill more than half a million cattle from Australia�s breeding herd this year, cutting it to 27.1m by June. The national sheep flock is also disappearing, with ABARE predicting it will fall to 91m by June, the smallest since 1920.

The drought is also pushing environmental concerns further up the political agenda. Vexed issues such as water rights, continuing land clearance and growing salinity in several states are all receiving renewed attention. After years of dwelling at the margins of the national debate, the drought is generating fresh interest in sustainable agricultural practices and the role of ongoing farm production.

The impact of the drought is also being felt in the wider Australian community, with urban dwellers responding to the hardships being faced by farming families. From national appeals down to projects co-ordinated by individual service associations, city folk are proving keen to assist their country cousins.

Donations

Heart-warming stories of donations of food and water supplies to struggling rural communities have filled the media. Programs such as �City Country Cobbers� involve registers of towns and families prepared to offer tangible assistance such as holiday accommodation, labour and family support to farm families affected by the drought.

The private sector has also stirred into action with the launch of a national Farmhand Foundation, to provide immediate cash relief to those suffering the effects of the drought. While its work in this area gathered praise, the Foundation�s long-term objective of developing strategies to �drought proof� Australian agriculture has been much more controversial, earning it the ire of both the scientific community and the environmental lobby.

The furious public debate about these issues is now spilling over into arguments about the management of national parks and bushland areas in the wake of the unprecedented bushfire disaster brought on by the long dry. And with the drought showing no signs of abating, things look likely to remain hot and harsh for a while yet.

Janine Mace is an Australian freelance finance and business journalist.