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Background
Definition of EC
EC are rare and severe events outside those a farmer could normally be expected to manage using responsible farm management strategies.The event
- must be rare, that is it must not have occurred more than once on average in every 20 to 25 years
- must result in a rare and severe downturn in farm income over a prolonged period of time (eg. greater than 12 months)
- cannot be planned for or managed as part of farmers’ normal risk management strategies, and
- must be a discrete event that is not part of long-term structural adjustment processes or of normal fluctuations in commodity prices.
EC-declared areas
An area must first become EC declared, or at least have a prima facie case for becoming EC declared, before drought-affected farmers and agriculture-dependent small businesses can obtain assistance.Due to the unprecedented severity, length and extent of the current drought, the Australian Government has recently (2006 and 2007) increased the number of EC-declared areas across Australia, extended the expiry dates for existing EC declarations and reintroduced some lapsed areas.
The scope of the assistance available and the amount of funding the Australian Government provides for it have also recently been expanded.
- EC Handbook - information on how an area becomes EC declared
- Exceptional Circumstances - information on which areas are EC-declared
- more information on Drought Assistance
History of drought assistance
Responding to the needs of people in rural Australia as circumstances change, the Australian Government, in consultation with state and territory governments and agencies, has evolved and continually improved EC policy and programs over many years.Prior to 1989, drought in Australia was regarded as a natural disaster, with assistance provided under the NDRA. The major emphasis of the assistance measures was to attempt to insulate farmers from the effects of drought through business support.
From 1 July 1989, drought was excluded from the NDRA when analysis suggested the assistance provided was poorly targeted, distorted farm input prices and worked as a disincentive for farmers to plan and prepare for drought.
This led to development of a separate NDP, which had a central philosophy of self-reliance and effective risk management in farming, recognising that farmers themselves can best make their own decisions based on their own assessment of risk.
Beginning of EC policy
The EC policy began in 1992 and was designed to operate in association with the Rural Adjustment Scheme.Farmers were provided with business support in the form of interest rate subsidies designed to maintain the long-term viability of the farm by helping farm businesses survive an exceptional event.
In 1994, the Australian Government introduced the Drought Relief Payment to provide income support to farmers experiencing a temporary loss of income. This assistance complemented the interest rate subsidies assistance.
Developing an EC framework
The ARMCANZ established a national framework for determination of drought as an Exceptional Circumstance in 1995.The framework for Drought Exceptional Circumstances declaration was based upon assessment of six core criteria:
- meteorological conditions
- agronomic and stock conditions
- water supplies
- environmental impacts
- farm income levels, and
- scale of the event.
Agriculture – Advancing Australia (AAA)
In 1997, the Australian Government announced the wind-down of the RAS and released an integrated rural policy package called ‘AAA’.The AAA package contained initiatives on farm business management, farm family support and community development.
EC policy, as reaffirmed in AAA, acknowledged that Government recognised there are rare and severe events that impact on the farming sector and are outside the scope of farmers' normal risk management strategies. It also accepted that these events could extend beyond drought.
AAA also established the ECRP as income support to replace the Drought Relief Payment.
Continuing improvements
In 1999, ARMCANZ agreed on new criteria for EC and these are the ones in use today (see Definition of EC at the top of this page).The Australian Government Minister for Agriculture, Fisheries and Forestry initiated a review of EC in 2000 that led, in 2001, to ARMCANZ deciding that
- some farmers outside a defined EC zone, but who are in reasonable proximity (that is, in a declared ‘buffer’ zone) and can also demonstrate that they are affected by the same exceptional events, will be eligible to make application under the same terms and conditions as those within the defined zone, and
- in order to enable the timely flow of assistance to farmers in an EC area, the States would be encouraged to use predictive modelling to demonstrate likely (crop) losses in an EC area, rather than wait until actual yields are known at the end of the season.
In 2002, the Minister announced that the Australian Government would provide immediate access to drought assistance as soon as an application for EC declaration in an area was referred to the NRAC for assessment. While they await the outcome of their EC assessments these areas are called ‘prima facie declared’.
Farmers in prima facie areas became eligible for income relief (also called ‘interim assistance’) for six months from the time of referral, even if NRAC later recommended against the application. If NRAC found the area to be undergoing an EC event, the income support would continue for two years from the starting date of the income support.
Further reforms
In 2003-04, agricultural regions continued to grapple with the impact of the 2002-03 drought. While producers in some regions began to initiate recovery processes, others continued to be affected by drought conditions.In 2005, the Prime Minister announced a new Drought Package for farmers continuing to face the effects of drought. The new package included
- an increase in the Exceptional Circumstances Interest Rate Subsidies level from 50 per cent to 80 per cent for farm businesses in their second and subsequent years of an EC declaration
- a doubling of the off-farm assets threshold
- the introduction of a $10,000 annual offset against the income support test to assist with the increased need for farming families to seek off-farm work, and
- an automatic, streamlined reassessment process for those EC declared areas nearing the end of their second year of assistance.
The Drought Package also contained a number of other new support measures. For more information see the former Prime Minister’s media release - New Drought Package Raises Assistance to $1.25 billion - 30 May 2005.
Recent developments
Due to the persistence of the drought through 2006, the Australian Government further increased the number of EC-declared areas across Australia, extended the expiry dates for existing EC declarations and reintroduced some lapsed areas.In October 2006, the Prime Minister and the Minister for Agriculture, Fisheries and Forestry jointly announced a significant policy change to EC arrangements that extended income support payments and interest rate subsidies to all eligible producers. Previously, there had been some differentiation between producers such as irrigators, dry land farmers and dairy farmers in certain EC declared areas.
In addition, in November 2006, drought relief in the form of income support and interest rate subsidies was extended to include small business operators who derive at least 70 per cent of their turnover directly from agriculture. Examples of agriculture-dependent small businesses that may be eligible include contract harvesters, fencing contractors, seed, feed and fertiliser suppliers, livestock transporters, shearing contractors and suppliers of farm machinery and equipment.
Australian Government expenditure on drought assistance in the five years to June 2006 is more than $1.2 billion.
In early 2007, the Australian Government announced a further number of new areas had been EC declared, with yet others undergoing assessment.
Last Updated: 12 May 2008
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