Cabinet divided on drought cash

The impact of the drought seems likely to also open a potentially volatile debate on the future of agriculture in vulnerable areas.

National calls for debt relief as mounting toll of big dry ruins businesses and suicides rise among farmers.

The searing dry which has dehydrated eastern Australia and is developing into one of the nation's worst-ever droughts appears likely to burn out of the bush and into federal politics.

Massive swathes of farmland have not seen significant rain for as long as two years, with little chance of relief before autumn. The loss of crops and livestock has been matched by an increase in suicide among debt-laden farmers.

Now, the tinder-dry economics of the Coalition Government could erupt in Cabinet as the rural-based junior partner, the National Party, pushes for major taxpayer-funded aid for drought-stricken producers, country towns and rural industries.

The Liberal-dominated Cabinet has already rejected a request for a A$25 million ($27 million) aid package from Victorian canner SPC Ardmona, after its hard line on the car industry and warnings that the Government will not rescue businesses in strife.

The SPC decision threatens the livelihood of thousands of fruitgrowers and the loss of thousands more jobs in areas which have traditionally voted for the Coalition.

The impact of the drought seems likely to also open a potentially volatile debate on the future of agriculture in vulnerable areas, especially huge areas of marginal country and industries such as cotton, rice and wine, which require heavy irrigation.

Drought has now gripped much of the eastern states' interior, rising up from South Australia through Victoria, New South Wales, Queensland and the Northern Territory.

Herd and flocks have been decimated as stock die in paddocks, or are sent for slaughter, as food and water run out. Country towns and businesses have been hammered.

Many farmers are sinking under a mountain of debt. Many applications for federal low-interest, long-term reconstruction loans have been refused because farms were not considered viable.

The CSIRO and the Bureau of Meteorology have warned that the extent and frequency of exceptionally hot years has increased rapidly over the past few decades and that the trend is expected to continue.

Agriculture Minister Barnaby Joyce, deputy leader of the Nationals, told a farmers' crisis meeting in Queensland more federal help was needed. He advocated a A$7 billion rural reconstruction and development bank to buy bad rural debt and bail out stricken farmers.

His expectations of a "mighty battle" in Cabinet are already being realised. Treasurer Joe Hockey yesterday indicated that little new help would be forthcoming.

He said aid was already available and a new scheme would start in July offering farmers the equivalent of the NewStart unemployment benefit of about A$450 a week for a couple. Hockey also said it was time for a debate on sustainable agriculture, including water management and global food demand patterns.

Australia burnout

A$70 billion rural debt across the country.
A$1 million average farm debt in Queensland.