$60m farm aid months away as Ludwig quits

Beleaguered WA farmers are still months away from seeing a single dollar from the Labor Government's $60 million concessional loan package despite high-level negotiations between State and Commonwealth authorities.

The loan scheme remains the subject of claim and counterclaim by State and Federal politicians and bureaucrats two months after it was announced by former treasurer Wayne Swan and former agriculture minister Joe Ludwig.

Senator Ludwig and Mr Swan, both Julia Gillard supporters, quit their Cabinet posts last night after she was dumped as prime minister.

Funding for the scheme was allocated in the May Budget and will remain in place despite the chaos in Canberra. Shadow agriculture minister John Cobb has committed the coalition to rolling out the loans if it wins the Federal election.

Officials met in WA again this week and made some progress on a deal to deliver the loans but key issues remain unresolved.

There is speculation among WA officials that the loan scheme is fundamentally flawed because the Commonwealth cannot collect on bad debts without taking out a form of security on farms known as a lien, but is powerless to do this without legislative change.

Senator Ludwig's office denied the claim earlier yesterday, saying: "We can absolutely confirm that no legislation is needed to collect bad debts."

The Commonwealth has agreed to cover bad debts after negotiations with the State. It has also agreed to cut the maximum loan from $650,000 to $200,000 and the life of the loans from up to 20 years to five years at the request of the State.

Canberra has also agreed to set the eligibility criteria for the loans at the insistence of the State. The remaining sticking points concern administration costs and the mechanism to deliver the loans.

The State estimates administration costs of about $5 million over the life of the loans, which have the potential to help about 300 WA farmers. It has suggested the Commonwealth could cover the administration costs by upping the interest rate on the concessional loans from 4.5 per cent to 5 per cent.

With no agreement pending on the administration costs, no sign of eligibility criteria and no application process in place, there is little prospect of loans flowing through to farmers before September.

Senator Ludwig said he wanted to see the loans delivered and there had been progress. "I've sent senior officials to go and work directly with WA to resolve the outstanding issues," he said.

A total of $420 million over two years is available under the loans component of the finance package - $60 million for each State and the Northern Territory.

The Commonwealth remains bogged down in talks with the States and the NT.

A separate WA Government farm aid package has seen 128 farmers receive operational grants of $25,000 from a $5 million pool.