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Government to redirect $3.9bn to drought relief programs

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Tas Bindi 6 minute read

The federal government pledged to establish a $5 billion fund for drought relief and mitigation programs, with $3.9 billion being redirected from a different fund.

The Morrison government announced that a $5 billion Future Drought Fund would be established to assist farmers and communities in rural and regional areas affected by drought in the future.

The fund will start with an initial $3.9 billion investment, which is redirected from the Building Australia Fund established in 2009 under the former Labor government to fund critical infrastructure, and will help finance “community services, research, assist adoption of technology, advice and infrastructure to support long-term sustainability in the event of the drought”.

Earnings from the Future Drought Fund, about $100 million per year, will be used to pay for water infrastructure and resilience projects, while the balance will be reinvested into the fund so that it reaches $5 billion by 2028.


“The challenges of drought vary from farm to farm, district to district, town to town, and we continually need to adapt and build capacity — the Future Drought Fund gives us this opportunity,” Prime Minister Scott Morrison said in a statement.

“The impact of the drought is not just felt on the farm. Spending dries up in regional towns as the drought worsens, which threatens the prosperity of local businesses.”

Further, the government said that it is establishing a $50 million On-Farm Emergency Water Infrastructure Rebate Scheme to provide primary producers in drought-stricken areas with up to 25 per cent of costs associated with the purchase and installation of new on-farm water infrastructure — such as piping, tanks, bores, troughs, pumps, fittings and desilting — as well as drought management activities to minimise the impact of drought on animal welfare and reduce grazing pressures.

The government also announced the extension of the Drought Communities Program from 60 to 81 local governments, providing each community with $1 million to fund new or upgraded infrastructure, while a new online Farm Hub hosted by the National Farmers’ Federation will allow farmers to access information about the support services available during periods of drought.

The announcement follows prolonged periods of drought in New South Wales and Queensland, as well as the fourth round of royal commission hearings, which focused on banks’ dealings with customers in regional and remote areas and saw bankers having difficulty defending their behaviour towards farmers whose businesses were affected by drought.


For example, case studies in the hearings revealed that banks had charged high default rates to agribusinesses who struggled to maintain their crops or nurse their livestock due to declining supplies of grass and fodder during prolonged periods of drought.

The major banks have since announced a number of drought relief packages, initiatives and lending policy changes. National Australia Bank had subsequently announced that it would stop applying penalty interest to drought-stricken customers if they get into loan arrears, as well as “proactively” offer them the ability to offset their farm management deposit (FMD) against their agricultural loans, with the offset taking the form of an interest rate discount.

Similar moves were announced by ANZ Bank, which also offered to suspend loan repayment for up to three months, waive restructuring fees and keep interest rates on hold for agribusiness customers experiencing financial stress.

Commonwealth Bank followed suit, discontinuing the charging of penalty interest while also allowing drought-affected farmers to use their FMDs as offsets against their mortgages.

Westpac, on the other hand, has not charged default interest for a number of years.

The policy changes made by the banks were commended by the Federal Agriculture Minister, David Littleproud.

[Related: Ombudsman calls for greater support for drought-affected SMEs]

Government to redirect $3.9bn to drought relief programs
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Tas Bindi

Tas Bindi

Tas Bindi is the features editor for The Adviser magazine. 

Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business. 

You can email Tas on: This email address is being protected from spambots. You need JavaScript enabled to view it.



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