Australia Warns Farmers Not to Expect Large Aid Package

By Dow Jones Business News, 
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By Rob Taylor

CANBERRA, Australia--Farmers battling Australia's second severe drought in under a decade have been warned not to expect a multibillion-dollar rescue package to help relieve rising debt, with Treasurer Joe Hockey warning "the days of entitlement are over."

Mr. Hockey's remarks underscore the pressures facing Australia's government as it grapples with rising unemployment triggered by a fading mining boom and a need to cut spending. The center-right government has already rejected financial aid for food processors that have been hurt by cheap imports. Other sectors, ranging from auto manufacturing to airlines, are also seeking federal support.

In an interview with Australian radio, Mr. Hockey played down a report in the Australian newspaper that Agriculture Minister Barnaby Joyce was preparing to ask senior colleagues to approve a seven billion Australian dollars (US$6.1 billion) package to buy out "distressed" farm loans, and set up a rural reconstruction bank.

"You just can't look at the problems when things are tough, because they can be good," Mr. Hockey said. "The answer to the problem of debt is not to have more debt, and interest rates historically now are at all-time lows."

Australian farmers have been shooting livestock after seasonal rains failed to arrive in the eastern states of Queensland and New South Wales last year. The latest dry spell follows a severe drought across much of the country between 2001 and 2009, which saw successive governments hand the agriculture sector a combined A$4.5 billion in aid. Australia's central bank is expected to keep interest rates at a historical low of 2.5% Tuesday.

The so-called Millennium Drought forced many ranchers off the land for good and contributed to Australia's farm debts rising around 10% a year to the current average of A$1.4 million, or a total of around A$70 billion, according to government data. But three in four farmers surveyed by the Queensland agricultural lobby AgForce in December said this drought is having an even heavier financial impact, as many farmers hadn't recovered from the earlier spell.

Mr. Hockey, himself a recreational farmer near Queensland's lush tropical northeast coast, said Australia needed a debate about sustainable agriculture. The country is already the world's driest inhabited continent and hopes to increase agricultural output dramatically to become a food bowl for Asia's fast-growing population.

Prime Minister Tony Abbott's coalition Cabinet, however, is divided between ministers in favor of smaller government and lawmakers belonging to the rural-based Nationals, who want more support for farmers and taxpayer funds for struggling industries viewed as economically strategic.

Mr. Joyce, visiting drought-hit towns in western New South Wales, said he was hoping to win approval within weeks from colleagues for a limited package of farm assistance that would help ranchers until July, when a new tranche of budgeted assistance kicks in.

"Drought is a natural disaster, and therefore it's appropriate that state and federal governments work together to tackle the problem," Mr. Joyce said. He declined to specify what level of drought assistance would be necessary.

In questioning more assistance for drought-stricken Queensland, a state where farmers are a major political force, Mr. Hockey risked antagonizing voters ahead of a Feb. 8 by-election that will be the first major test of conservative popularity since Mr. Abbott won a sweeping victory over the center-left Labor party in September elections.

In the four months since the national poll, Mr. Abbott's government has suffered the sharpest slide in popularity in Australian history. In opinion polls, voters have cited threats of sharp spending cuts, a worsening economic outlook, government backflips over education spending, and Australia's handling of a diplomatic row with neighboring Indonesia over border security and surveillance as reasons for turning their backs on the Liberals.

Voters' fears over job security and the government's commitment to industry were fueled further by manufacturers such as General Motors Co. planning to end decades of production in Australia, citing high costs.

Campaigning in Brisbane ahead of a by-election triggered by former Labor Prime Minister Kevin Rudd's retirement from politics, Mr. Hockey said Australians had to accept welfare cuts if the country was to regain some of its economic strength.

"Everyone in Australia must do heavy lifting now," he said. "The age of entitlement is over, the age of personal responsibility has begun."

Write to Rob Taylor at rob.taylor@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


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