Subsidies flow to rural rivals

New Zealand farmers are the least-protected in the developed world, with their competitors continuing to enjoy plenty of taxpayer support.

The OECD says just 2 per cent of farm income in New Zealand comes from taxpayers.

But rather than taking the form of direct farm subsidies, New Zealand's public funding is delivered through research grants.

The Organisation for Economic Co-operation and Development report on world agriculture says New Zealand farm support "is low across all commodities".

Poultry and eggs were aided through market price support provided by sanitary measures at the border.

The report says Australian farmers benefit from a little more Government money than their transtasman neighbours, at 4 per cent, or a little over A$1.3 billion ($1.4 billion).

New Zealand and Australia are the only two countries with producer support at less than 15 per cent of total income.

Despite the efforts of the two countries to promote free trade and fewer agricultural subsidies, the OECD says there has been little change in recent years in the amount of money paid by some other countries to help their farmers.

"Production-linked measures still dominate producer support in most countries, encouraging output, distorting trade and contributing to lower world prices of agricultural commodities."

Australia would have gone close to matching New Zealand as having the world's lowest levels of support if not for milk and sugar taxes collected from consumers and paid to farmers.

The OECD report estimates the total amount of farmer handouts made by its members at about US$279 billion ($390 billion) last year - about the same as was paid in 2003.

American farmers were estimated to receive support of about 18 per cent or US$46 billion - an increase of almost US$11 billion over 2003.

European Union support was 33 per cent, or US$133 billion, Japan was at 56 per cent, or US$48 billion, and South Korea at 63 per cent, or US$20 billion.

The report praises Australia, saying: "Significant progress has been made since 1986-88 in removing policies creating agricultural production and trade distortions."

While Australia rated well in terms of direct handouts to farmers, it did not perform as well in general benefits for the farm sector.

The value of support for general services to agriculture in Australia has risen to US$668 million, an increase of US$86 million since 2003.

Most of this support is through funding for research and development, and also fuel rebate schemes.

When general benefits and specific benefits were considered together, Australia slipped below New Zealand in the handout stakes to just 0.3 per cent of GDP (compared with New Zealand's performance of 0.4 per cent of GDP).

- AAP, additional reporting Liam Dann