LETTERS: by News WeeklyNews Weekly
Rural debt a legacy of Â“get big or get outÂ” mentality
, April 8, 2000
Rural debt a legacy of "get big or get out" mentality
I read with interest "Major debt crisis in rural Queensland" (News Weekly, February 26, 2000). Unfortunately, the problem is not restricted to Queensland - the debt level in rural Australia is constant in all states and has been for two decades.
Australian rural debt first became a major problem in the late 1970s and early 1980s, and in most cases was compounded greatly by drought, flood, etc. During the first years of the "Get Big or Get Out" program, farmers were told that to compete in the new new global economy, they would have to cut costs, become more efficient, produce more, get bigger and diversify.
"Get bigger" simply meant buy out your next door neighbour, and this is what happened. Because of this policy, in some areas the cost of rural property rose dramatically. To remain on the land and in the preferred district, it meant in many cases that producers paid many times over production recovery costs for land. The policy also meant a large scale relocation of producers from their own districts and states.
Despite the removal of some 168,000 family farmers in this way, the profit levels of those who went into debt because of government policy, have continued to deteriorate. Money was made readily available from a variety of sources, but it was primarily backed by the Commonwealth Rural and Development Bank, plus the Primary Industries Bank of Australia.
As the debt level expanded and government support for the rural economy deteriorated, banks revalued large areas placing many into a higher risk category.
This policy placed many previously sound properties with heavy borrowings beyond the capacity to cover the debt created.
In Australia, drought or other environmental extremes are a certainty. The "Get Big or Get Out" program never catered for the possibility that the debt may continue to expand because of environmental extremes or other factors, such as low commodity prices.
As a result we now have the debt situation highlighted in News Weekly and a Government intent on ignoring the problem, pretending instead that it will go away.
It has been proven that despite all attempts to produce more from the hardest environment on the planet, there is a limit. Further attempts to cut costs and economise are constantly hampered by rising fixed government costs.
Diversification has expanded the debt level greatly. Producers borrow money to invest in a range of get-rich-quick schemes promoted by government. In some cases producers have borrowed heavily only to see many of these pretend industries collapse.
The environmental legacy of two decades of failed policy will be felt for generations. The fact that the rural debt level cannot be covered is yet to be realised. As more and more go by the wayside, the scale of the debt continues to rise.
Instead of representing producers on an individual industry basis at a national level, our rural representatives have been touring the world looking for scapegoats - usually the Americans and the European Community - at the same time pretending that they can influence world politics.
Even if they did admit to the problem, our current crop of career power brokers do not have the courage to provide restructuring finance and low interest rates.