The Productivity Commission has recommended a major overhaul of the Coalition’s $5bn Future Drought Fund to focus on programs that have a “lasting public benefit” even if that means fewer funding announcements.
The fund, established at the height of the 2019 drought, was designed to provide $100m in annual funding to build regional resilience and prepare farmers for drought. So far, it has spent $65m in 2020-21, $72m in 2021-22 and $92m in 2022-23.
The federal government commissioned the review of part three of the Future Drought Fund Act eight months ago to assess the effectiveness of the fund to support drought resilience activities.
The review said that while the Future Drought Fund (FDF) was a “solid foundation for drought resilience”, it concluded there was a need for greater planning and more targeted programs to deliver long term transformational change and wider community benefits.
“Over time, it might be expected that there will be a shift in the types of activities undertaken through the fund,” the review said.
“For example, there may be greater specialisation in a smaller range of activities in areas where the fund is best able to generate enduring positive change. The result may be even fewer programs.”
It found there needed to be “a stronger focus on activities that generate lasting public benefits”. “The FDF should focus on activities that generate transformational change, build natural capital, and support a place-based approach to building social resilience,” it said.
It recommended rewriting the aim of the fund to focus on public benefits and climate change resilience, cutting back the farm business resilience program by tightening eligibility requirements, and streamlining two climate tools that were established to provide projections, economic analysis and advice on best practice into one service.
“The Commission considers that the Australian Government should confirm that the FDF will only invest in drought resilience activities that are plausibly expected to lead to the Australian community being better off overall,” the report said.
It also recommended the removal of the legislated advisory role of the Regional Investment Corporation, dubbed “the Barnaby Bank”, to the FDF.
While the Productivity Commission report acknowledged some government drought support was appropriate, it said that taxpayer funds must show public benefit and promote changes that would not otherwise have been made.
It was critical of the fund’s aim that implied any activity that contributes to economic, social and environmental resilience in drought is a public good and could merit government funding.
“This overlooks the fact that government resilience interventions also have costs, which can often fall to other sectors of the economy, and that many interventions offer benefits to a narrow group of individuals rather than to the broader public,” the report said.
The recommendations suggest a pivot away from individual business resilience training towards improving natural capital through natural resource management programs as this would provide benefits for farmers and the wider community.
It added that the success or otherwise of the fund in building resilience would not be evident until tested by drought conditions.
“At this stage the extent to which the fund is building drought resilience is unknown,” the report said.
The review was released one week after the Bureau of Meteorology confirmed Australia was in an El Niño weather pattern, with parts of the country already in drought. The treasurer, Jim Chalmers, warned farmers on Tuesday at a drought summit in Queensland that Treasury analysis showed disasters and a warming climate would have large economy-wide effects.
“The Productivity Commission’s report highlights that drought is just one part of the larger climate change picture that means we need to focus not just on drought resilience, but broader climate change resilience too,” Chalmers said.
Chalmers said the 2019-2020 bushfires and October 2022 floods each cost the Australian economy about $1.5bn. He added that Australian crop yields are expected to decline by 4% by 2063 due to the climate crisis, wiping $1.8bn off gross domestic product in today’s dollars.
Commonwealth funding under the Disaster Recovery Funding Arrangements (DRFA) has increased by 433% over three years, he said, and Commonwealth spending on disaster recovery jumped from $335m in 2017-2018 to $2.5bn in 2022-2023.
“As our climate warms into the future – potentially by 1.9 degrees here in Queensland over the coming three decades – we know that our farmers are on the frontline,” Chalmers said.
The productivity commission also recommended the department of agriculture establish a working group to help improve the design and implementation of the FDF for the benefit of Aboriginal and Torres Strait Islander peoples, finding that Indigenous people did not participate in shared decision-making around the fund’s objective, design, or governance.
“Many Aboriginal and Torres Strait Islander people are directly or indirectly involved in agriculture,” the report said.
“However, Aboriginal and Torres Strait Islander people remain underrepresented in the sector.”
The federal government has to finalise the next four-year funding plan for the FDF by the end of February 2024. The Productivity Commission said that meant now was a “natural point” to map the federal, state and territory government policies and programs that support agriculture, land management, drought resilience and climate change resilience and identify overlaps.
