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Australia's worst drought in recorded history
AUSTRALIA'S record drought may slice $3 billion from export earnings and cut economic growth by as much as 1 per cent this year.The bleak forecast, which will affect the election-year federal budget, comes as the Howard Government prepares to soften drought assistance guidelines to help stricken farmers. Senior Coalition figures yesterday hit back at claims the Government was wasting money by helping out marginal farmers. But Canberra also came under pressure from state governments - and its own backbench - to extend emergency relief to other states and to agricultural contractors, such as harvesters. The farm sector represented just 2.7 per cent of Australia's economy last year, but the drought could cut its total output by 40 per cent this year. Private sector economists are re-assessing their forecasts for economic growth following widespread failure of spring crops. Commonwealth Bank chief economist Michael Blythe said previous droughts had reduced Australia's economic growth by between 0.5 and 0.75 percentage points. "If you're only growing at 2per cent or so at the moment, then that is quite a sizeable reduction," Mr Blythe said. Private economists are forecasting similar growth reductions, although some, including ABN Amro and ANZ, say there is a risk of a larger fall of about 1per cent. The Productivity Commission recently calculated that the last three droughts had each reduced economic growth by 1 percentage point. Peter Costello last week said Australia was suffering a "rural recession", but he was unwilling to quantify the impact on the overall economy. Yesterday, he told Coalition MPs the drought was a serious economic issue. The Government has come under attack for propping up unviable farms, with a leading water scientist, Peter Cullen, and the Australia Institute, arguing it would be better to steer these farmers off the land. But Deputy Prime Minister Mark Vaile yesterday attacked these suggestions as "outrageous", while Nationals' MP Bruce Scott called them "un-Australian". The Nationals leader told Parliament Australia had very low levels of agricultural subsidies compared to Europe, Japan and the US. "We do not prop up unviable farmers in Australia. Australia's farmers are very competitive and they are facing dire circumstances," Mr Vaile said. The Government will further ease drought relief guidelines with an announcement expected within a week. The new measures, costing $350 million, are expected to be extended to South Australia and Western Australia. Posted by: Oztralian 2006-10-17 |
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