THE PRESS THURSDAY, FEBRUARY 23, 1989. The high cost of drought

Press, 23 February 1989, Page 12

THE PRESS THURSDAY, FEBRUARY 23, 1989. The high cost of drought

Without doubt the drought in Canterbury and North Otago holds grim prospects for the provincial economies beyond the immediate calamity on farms. The reasoning behind the Federated Farmers’ proposals for drought assistance is sound: unless production is restored to the large tracts of dried-out country, thousands of people in the cities and provincial centres will suffer. Inevitably, relief will have to be applied first where the problems begin — on the farms. The proposals put to the Minister of Agriculture, Mr Moyle, on Tuesday, recognise this fact but have been constructed carefully to allay any suggestion that what is being sought is a hand-out for farmers.

Perhaps unnecessarily, the package of proposals restates the case for removing the excise tax on diesel fuel. Removal of the tax will remove an unfair and illogical burden on farmers and on commercial fishermen, it is true, and this would make the resowing of pasture a lot cheaper. But the case against the excise tax on diesel stands on its own merits, whatever the weather, and hardly qualifies as a drought-relief measure. Nonetheless, abolition of the tax would bring benefits to farmers only when the tractors are in use, and that means when work is being done to hold or improve production. The thrust of all the proposals is to ensure that farmers will not be prevented from restoring their land or replacing capital stock simply through a lack of finance. Any assistance will need to be targeted, and the Federated Farmers’ package is at pains to plead only for those farmers whose difficulties arise specifically from the drought, not from other farming problems. Even so, treating each case on its merits is expected to mean that as many as 2000 farmers in Canterbury and North Otago would qualify. Chief among the recommendations to Mr Moyle are proposals for the Government to set aside and service for five years such debt as is clearly droughtrelated, and for the Government to guarantee seasonal finance where normal security requirements cannot be met. Neither of these

measures absolves farmers from their responsibilities, but each would give farmers a breathing space to defer the cost of fertiliser and seed to renovate droughtblasted pasture, or of breeding stock to replace that which farmers were forced to sell or slaughter when feed ran out.

Many of the other measures propose alternative tax arrangements that would allow farmers to defer some tax payments, or equalise losses and profits over several years, or in other ways take the immediate pressure off farmers’ ability to invest in next season’s production. Some of these measures might need legislative changes; the discretion granted the Commissioner of Inland Revenue and the Minister of Finance in these matters is pretty closely circumscribed by the law. The proposals will, in any event, need all of the two to three weeks for study between now and the time the Cabinet is expected to give its answer. Quite apart from the legal aspects, it would be prudent to ensure that none of the measures taken can be construed — or even misconstrued — by competitors overseas as hidden subsidies to New Zealand’s agricultural production. Farming in New Zealand is going through a rough time. The industry was one of the first to feel the chill of market-driven Rogernomics, yet returns to farmers are limited by inefficiencies in downstream processing and transport and by monetary manipulations beyond the industry’s control. At a time of high world prices for what New Zealand’s farms can produce, the potential return is not being fully realised by the farmers. On top of this, the drought has dealt a severe blow to levels of production. The proposals now with Mr Moyle attempt to address only this last factor. By focusing on just this one aspect of farming woes in the South Island, the package is a useful reminder that we are dealing with a natural disaster as devastating as any flood or earthquake. This analogy is significant. The call for help raised by the drought is not exceptional.