Is it conceivable that a political leader could make a major policy spending announcement, weeks out from a federal election, that was not 100% political? That’s what the Prime Minister wants us to believe as we consider the government’s decision to funnel a further $714 million in drought assistance and welfare to Australian farmers. To suggest the latest round of funding was motivated by the impending election, fumed the PM yesterday, was “pathetic”.  In fact, the only pathetic aspect of yesterday’s announcement is the policy itself. And before any reader jumps to a kneejerk assumption that Crikey is off on an anti-Howard rant, we’ll defer to the editorial in today’s Australian to explain why: 

The trouble with drought relief is that it props up unviable farms. The Australian recognises the terrible pressure a drought puts on individuals, families and communities, but drought assistance is a government intervention and as with any government intervention, it distorts the market. So long as farmers in marginal agricultural enterprises know that the Government will bail them out, they defer the difficult decision to cut their losses and leave the land. Whereas other unviable industries go to the wall in the face of changing conditions, there is an assumption that farmers should not be allowed to go broke, and if they do, they should be given assistance to exit the industry. When droughts break, as the always do, new entrants go in, enjoying the good times and then expecting a handout when the next drought hits.  Sadly, the lead up to a federal election is no time to expect rational economic decisions, but this is what is required. Handouts to unviable farms are a drain on the public purse and on scarce resources such as water, and by putting subsidised products in the market, they make it harder for viable farms to survive.

That was the enlightened verdict of the Government Gazette this morning, and we couldn’t have stated it better ourselves.