Farmers are set to receive interest-free loans of up to $2million as Australia battles the worst drought on record, Daily Mail Australia can reveal.
Prime Minister Scott Morrison will announce on Thursday struggling graziers will receive emergency funds to feed their cattle and sheep, irrigate their crops and pay their farmhands.
They also won’t have to make any repayments for two years, before a discounted rate kicks in.
Farmers are set to receive interest-free loans of up to $2million as Australia battles the worst-ever drought. Prime Minister Scott Morrison has announced those on the land will be receiving funds to feed and transport their cattle and sheep, irrigate their crops and pay their farmhands (pictured is Mr Morrison, left, with farmer David Goodingt at Dalby, Queensland)
How the drought loans will work
Farmers will be entitled to up to $2million, interest-free for two years
Small businesses in drought-hit towns eligible to borrow up to $500,000
Both farmers and small businesses would repay interest-only in years three to five
They would pay principal and interest from years six to ten
The government-owned Regional Investment Corporation is providing $1billion over four years
‘Farmers will not have to pay a cent for the next two years, and even after that, interest only on a discounted rate,’ Mr Morrison said.
‘We will continue to keep providing more support as the drought rolls on.’
Under existing drought loans, with a 10-year term, farmers have to make repayments straight away but they only pay interest for five years.
As part of the new scheme, small businesses in drought-affected towns will be able to borrow up to $500,000, also with a two-year interest-free period.
Like the farmers, they will allowed to repay the loan interest-only in years three to five, before repaying both the principal and interest from years six to ten.
The Australian government’s Regional Investment Corporation will be charged with assessing whether a farmer or a small business in a drought-hit community should qualify for the loan.
Farmers in drought-hit communities (property at Bollon in Queensland, pictured) will be spared from making any repayments for two years
What constitutes a drought?
The Bureau of Meteorology defines a drought as an acute shortage of water, based on scant rain.
The situation is serious when showers lie within the lowest 10 per cent band of recorded rainfall.
It’s severe when rainfall levels are at the lowest five per cent on record.
The weather bureau’s record show the situation is particularly dire in New South Wales west of the Great Dividing Range.
Water flows into the Macquarie and Namoi valleys are the lowest on record, with rainfall at the worst level since 1920.
Both loan schemes are expected to cost taxpayers $1billion over four years, depending on demand.
Funding from the loans is coming from an existing $2billion pool within the government-owned farm lender.
Mr Morrison said the package was an acknowledgement the drought was tough not just on farmers but the towns linked to their fortunes, as graziers and small businesses were forced to seek overdrafts on their bank accounts.
‘We also know the drought has been tough on small businesses that rely on agriculture,’ he said.
‘Shearing contractors, harvesters and livestock transport providers have seen their turnover hit, and in many cases struggle to survive.
‘Rural communities can’t function without these small businesses, that’s why we are stepping in to provide this extra support.’
Mr Morrison said the interest-free loans were designed to help farmers buy hay, transport their livestock, fix their fends and refinance their existing debt.
‘Our drought plan is not set and forget,’ he said.
More than 99 per cent of New South Wales is still in drought, with more than a third – or 34.7 per cent – of the state suffering from an intense drought
‘We have been back on the ground listening to farmers and their communities, and this package is a direct response to their feedback.’
More than 99 per cent of New South Wales is still in drought, with more than a third – or 34.7 per cent – of the state suffering from an intense drought.
Dam levels are at precariously low levels, with the Keepit reservoir in the state’s central west at just 0.8 per cent capacity.
The Burrendong dam is at just 3.7 per cent.
The situation is so bad towns and cities, including Dubbo, have toughened their water restrictions.
Residents there and in Orange are expected to run out of drinking water by the middle of next year.
The Morrison Government is stepping up funding to help drought-stricken farmers a month after former Nationals leader and deputy prime minister Barnaby Joyce suggested drought-stricken farmers needed to consider quitting the land if they had failed to turn a profit in a decade.
A University of Melbourne research paper released in 2017 concluded Australia was suffering from the worst drought in 400 years, based on a reconstruction of 800 years of seasonal rainfall patterns.
The Bureau of Meteorology has described the drought afflicting south-eastern Australia as the worst in almost 100 years.
Rainfall levels in the Murray-Darling Basin, west of the Great Dividing Range, are at the lowest level since at least 1920.