So much of the comment about farmers and drought assistance shows a serious lack of knowledge and understanding of the economics of agriculture. This on all sides, and nowhere worse than at the NFF and the National Party.

Firstly as to the timing of the government announcement. This is the week that the crops failed. Had it rained a fortnight ago they would not have regarded it necessary. If the forecast said that it will rain tomorrow they would be hanging back. The forecast is for no rain next week.

Had the government delayed even another week to make this announcement the financial markets might have reacted first, and that would very likely have been more painful than you could possibly imagine. You should be grateful that so little money from government could prevent this from happening. The government should have been offering this assistance to many last January, but they refused.

The article in the Australian states that this drought assistance props up unviable farms. Surely that is its purpose. In the present circumstances there are more unviable farms than Australia can afford to have. However this assistance should go further to prop up the whole unviable industry. I’ll tell you why.

The article in the Australian states that drought assistance “distorts the market”. If only their research had been done at the library instead of at the bar.

Market distortion is at the root of every Australian farmer’s biggest economic problem. Distortion in particular by way of heavy subsidization of our competitors in other countries, but also by way of tariffs on agricultural products exported by Australia, some of which have in the past been seen as offsetting tariffs levied by Australia on imports of manufactured goods from those countries.

There are also other distortions, e.g. import quotas. The market distortion that The Australian complains about doesn’t even rank as peanuts compared to the distortion created by governments in other countries.

The latest figures that I saw were for 2003, so by now a bit out of date, but those figures in a paper presented by the minister Truss to the Outlook conference of 2004 showed that in Australia 4% of farm incomes came from government. In the US this was 18%. In Europe 36%, and in Japan and Korea around 60%.

This is the world market that Australian farmers operate in. It is the market which sets the price for our major agricultural commodities, the market into which more than half of our production is sold.

So Australian consumers get their produce at heavily subsidised prices but make very little contribution at all to the subsidies. In Australia it is the farmers who make up the difference between the price Australian consumers pay and the world cost of production. The difference is now so great that we can’t do this even in a good season. We no longer have the margins needed to set aside adequate reserves against calamity such as drought.

And the most mind blowing thing of all about this is that the NFF and National Party are ardent promoters of the unilateral abolition of government assistance to Australian agriculture. By world standards we never had much government assistance, but they adopted this policy nearly 25 years ago with the promise that if we showed the way all the world would follow. The rest of the world did not follow, and these &^#*wits refuse to acknowledge that they got it wrong. In the meantime the acute disadvantage at which we have been set compounds year on year.

There are professors in our universities who teach that Australia should shut down agriculture altogether and import its food. They show a total lack of understanding of how a market works. If Australia stopped producing not only would world prices rise dramatically (note the effect that the impending failure of Australia’s wheat crop had on the world price of wheat in recent weeks), but the price that Australia paid for the produce would not be the subsidised price. It would be the real cost of production price, with margins added.

So don’t you let any ^$%*witted academic convince you that you don’t need farmers, nor that you can’t afford to keep them there to continue producing. The depopulation of rural Australia that we have seen over the last twenty years will soon come around to bite Australia very badly. It is the result of very bad government policy, policy which was driven by the NFF and the National/Liberal parties.

When it does rain Australia will discover that there are too few able bodied people left in rural Australia to get the necessary work done. I quote from G. K. Chesterton, a very apt quote I saw again this week: “It is not that they can’t see the solution. It is that they can’t see the problem”.