Crop cover subsidy should be short-term, review finds
The NSW Independent Pricing and Regulatory Tribunal (IPART) says any subsidy to encourage take-up of crop insurance should be temporary.
“We consider that a temporary subsidy…is likely to be the most effective measure to help meet the objective of developing a commercial market for multi-peril crop insurance,” it says in a final report.
It says any subsidy should be set at the same percentage rate across regions, regardless of risk variation, to avoid supporting inefficient farming practices and cropping where there is more chance of failure.
The review finds a temporary subsidy may result in a small net benefit across society, but would lead to higher government spending, because its cost would more than offset any subsequent savings in drought assistance.
IPART last year released a draft report on its review of multi-peril crop insurance incentives, and held public hearings last August.
The final report reiterates its view that additional weather stations offer the highest benefit per dollar spent, followed by a business skills program and the temporary upfront subsidy.
“While the weather stations and the business skills program are unlikely to increase the uptake of multi-peril crop insurance, they could assist farmers to be better prepared for drought.”
Weather stations may help improve farming practices, but would not materially reduce the cost of insurance premiums because current weather information “is sufficiently robust”, it says.