Dry spell Down Under: aid for farmers may create a moral hazard

ONCE again Australia is in the grip of a prolonged drought and once again its government has fallen back on the old nostrums: more dams and cash handouts to tide over affected farmers.

So far, the ruling Liberal-National Party coalition under Prime Minister Scott Morrison has promised a support package of A$100 million (S$93 million). Canberra has also legislated a A$5 billion future drought fund and plans to spend A$100 million annually to find ways to help the farm sector cope with dry spells.Giving handouts has been the fallback position for every government in the past. It has been reported that almost 30 per cent of the country's farmers are now eligible for welfare. And if all who are eligible were to apply for payment, it could cost taxpayers about A$1.5 billion per decade.

As for the promise to build more dams, this has been dismissed as yet another public relations exercise. By their very nature, dams are long-term projects. And there is, of course, no assurance of adequate rainfall to fill all those dams. And even if those dams did fill up, it will create ever-greater incentives to expand farms, making things worse when the next drought hits. There has also been a push from rural-based politicians for rivers that flow northwards in the tropical regions to be diverted to the parched south. This proposal has been bandied about since the 1920s but studies indicate that such an undertaking would be both hugely expensive and without certainty of the claimed benefits.