How accountants can support your drought strategy

Speaker 1:
Welcome to CPA Australia's With Interest podcast, bringing you this week's need-to-know information for businesses and accounting professionals.

Kimberely Ohayon:
Hello and welcome to CPA Australia's With Interest podcast. I'm Kimberley Ohayon, Manager of Engagement and Advocacy at CPA Australia. The State of the Climate 2022 report recently released by CSIRO and the Bureau of Meteorology has found changes to weather and climate extremes are happening at an increased pace across Australia. The report shows an increase in extreme heat events, intense heavy rainfall, and longer fire seasons. As we face increased risks from weather events including droughts, it's important for businesses along with their professional advisors to plan for and consider these risks as part of their business planning. In today's podcast, we'll take a specific look at the risks and approaches to drought planning, preparedness and recovery, and the role that accountants play in this cycle. For farming and regional businesses grappling with widespread floods, drought may be the last thing on their minds, but now is the time to prepare for the next drought. Joining me to explore the government's approach to drought preparedness and recovery is Courtney Bryant, Assistant Secretary from the Commonwealth Department of Agriculture, Fisheries and Forestry. Welcome to the podcast Courtney.

Courtney Bryant:
Thanks Kimberly.

Kimberely Ohayon:
Courtney, I've gotten to know you and your team through recent consultation on a variety of issues relating to drought and I was hoping you could share a bit of your background with our audience and what brought you to working in drought policy.

Courtney Bryant:
Thanks very much for that Kimberly, and thanks for the opportunity to speak with you today. I know it must seem odd talking about drought when a lot of Australia's underwater, but I think one of the thing that's really important to remember is that the next drought is never too far away. So I've come from regional Australia and I'm really passionate about work that supports agriculture and our regions. And over the past few years I've had an opportunity to work on lots of drought-related programmes such as the farm household allowance and Regional Investment loans and the Rural Financial Counselling Service.

The opportunity came up to work on the broader drought policy response and to think about what we need to do, which brings all these programmes together. And I was really keen to take that on because of all the stories and information I'd heard working on those individual programmes about how drought does impact our regions, but also the really positive work that agriculture does on the ground to prepare for it and how amazing some of our farmers out there are in terms of being prepared and thinking ahead to drought and the innovation in which they undertake to manage the Australian climate, which as we know is really variable.

I really enjoy working with my team who are equally passionate about their work and we all know that we can't stop drought. But what we can do is think about the work we can do now to be prepared for the next drought, and how we can also encourage others to be thinking ahead and being prepared for drought because we all know that's the best way in which to manage through drought, is to plan ahead and be prepared.

Kimberely Ohayon:
Absolutely. And I think as you say, we can't stop a drought. We know drought is an ongoing part of the Australian experience. So can you share a bit with us about the government's broad approach to drought policy in Australia and where we're at at the moment?

Courtney Bryant:
Yeah, totally. Drought policy has a long history in Australia and there's a lot we can learn from the past. Over the last 50 years, drought policy has evolved from being seen as a natural disaster in exceptional circumstances to being one that focuses on encouraging preparedness, sustainability, resilience and risk management for farming businesses and related communities. And this is followed on from a range of reviews and work that's been done to recognise that this really is the best way to get through drought, is to plan ahead and do the work ahead of drought.

We all know that the best time to prepare for drought is ahead and not when conditions start to dry. And so now while conditions are favourable is now is the time to really be thinking about what we should be doing. And while we are experiencing flooding, we need to keep that in mind that the variability of climate means that drought could not be too far behind.

The government has been really focusing on what we can do to help prepare and help farmers and communities to prepare. And so a lot of work's been going on under what we call the Future Drought Fund. And that's providing support for a range of things, including better information tools, looking at how we can work with farmers throughout state agencies to help proactively plan for drought, looking at regional drought resilience plans so that regions and communities can feel prepared. Also, looking at developing drought resilience farming practises and technologies and thinking how we share those more broadly. And also investing in our local community leaders, networks and organisations because we all know during drought there's a real pool on using those community networks to help get through when the resilience is tested. This is in addition to a range of ongoing programmes that we have. So things such as the farm management deposits scheme, low interest loans delivered through the Regional Investment Corporation, as well as farm specific tax incentives.

We also have a range of safety net measures that are there all the time, not just for drought but for any risks or issues that might come up for farmers as we recognise farmers do face a range of risks. So this includes income support payments through the farm household allowance, and there's also financial counselling support available through the Rural Financial Counselling Service at all times.

So the government's policy focus also on making sure we are ready to respond to drought, but also really focusing on that long-term resilience and preparedness for farmers and the communities as well. This provides me with a nice segue just to talk about actually what we are doing because we need to be prepared as well as the government.

Following the last drought, we've been really considering about what we need to do and how we can work better for the next drought and we focus that on reviewing the Australian government's Drought Response, Resilience and Preparedness Plan. So we're reviewing that at the moment with a view to have a new plan in place by 2024. We're also reviewing our National Drought Agreement, which is a really significant agreement we have with our state and territory colleagues, which looks in terms of how we work through drought with them as well. And so that's under review at the moment with a view to have a new agreement signed in 2024. And so we are doing a whole range of public consultation on these as well and we are really keen to hear from a range of stakeholders recognising how many people need to be involved in terms of a drought response.

Kimberely Ohayon:
Thanks Courtney. And these are very important reviews and consultations that are underway and it's great to see, I guess, the government's evolving approach and consideration of all the stakeholders in that consultation. I did mention earlier that CPA Australia and the department have also been working together on a range of drought issues, including the ones you have mentioned, but more specifically on a drought shared responsibility framework, which takes a holistic view of the drought cycle and the key players with the role throughout this cycle. Can you tell us a bit more about the framework?

Courtney Bryant:
As I mentioned, there have been a range of reviews. One thing that we consistently heard through our networks and through the reviews was that there were a lot of different players involved in the last drought response providing support. And farmers and communities really valued that support, but messaging and information was sometimes inconsistent and this led to confusion. And as you can imagine, when people are going through a really difficult time with drought and having to make difficult decisions, they really do need that clear information and understand who they need to talk to. They don't want to be referred to different people or be unsure of what support is out there.

One thing we really thought as a department we could do was to talk to our stakeholders and to then from that build a collective understanding of shared responsibility in terms of both the drought response, recovery and preparedness. This was intended to ensure that everyone knew their role and was able to work together more effectively to support better outcomes for farmers. Because importantly for this, we really were supporting farmers right at the centre of this, farmers run their business and the business people as well. And so we really wanted to find ways to communicate the information support that was out there for them, but recognising that they make the decisions about their business.

To work through this, we did establish a working group and CPA was a member on that. And the working group has met regularly to both share information and also look at ways in which we can work together. So obviously thinking ahead to when the next drought is, how we would work together, but importantly also at the moment thinking about how we can encourage preparedness and share information around preparedness. And we have to live with a number of tools under that, including a drought referral cheat sheet just to cut through about what information is out there and what support is out there. Also, we've developed an animation on our website, which is a clear way communicating the fact that there are lots of people involved and that farmers have lots of support out there that they can access and talk to about a whole range of different issues around their farm business to help them prepare for next drought.

Kimberely Ohayon:
So just delving a little more into shared responsibility and that concept, what role do you see that accountants have in the drought cycle?

Courtney Bryant:
Yeah, no, that's a really good question and I think I've reflected earlier about the range of roles I've had. And in all the roles I've had, when talking to farmers, one thing consistently we heard and I've heard is that accountants are so important to farmers and farm businesses. And they're often based in their town or their region and they have these longterm relationships with them. And so we've really felt like that was a really important relationship that we could link into and recognise that it's really important across the drought cycle.

We know the best time to help people prepare for drought is before it happens. However, we also know there's no right way of getting ready for drought. There's no quick cheat sheet. We can say do all these things and then you'll be fine. We really needed to find the trusted advisors such as accountants who know their clients and their business and can help them think about what's right for them to prepare.

From our work on this, we have seen that there are a range of people and organisations that have an important role to play. So our shared responsibility work allowed us to obviously identify accountants, but also identify all those other links for accountants as well to think about who else they could link them in with. So we know accountants can help clients prepare for drought by ensuring there is a plan to meet financial needs and goals over the short, medium and long term. Talking about personal financial needs and goals for individuals and families and providing advice on taxation and business structures. However, they can also provide specific advice when conditions are dry and people are reviewing their business plans or accessing government drought support. They can also help once conditions ease and people are looking to learn from how they got through the drought and what they need to do to prepare for the next one as well.

Kimberely Ohayon:
Yeah, absolutely. I think that that relationship, the ongoing relationship between farmers and their accountants is so important not just through drought but through probably a range of business risks or opportunities even. So the department has done some recent market research into agricultural communities and their communication and support preferences, particularly throughout the drought cycle. Can you share a bit about what the research tells us about good practises for businesses or what they're doing to prepare for different risks?

Courtney Bryant:
Earlier this year, the department undertook some research into how we can support and communicate with farmers and farming communities around the entire drought cycle. The research showed the importance of the trusted advisor network, such as accountants, which was something that wasn't a surprise to us, but it really was a very strong recommendation from the research. It demonstrated the importance of accountants in making sure that relevant and timely information was available.

Some of the key findings we found were that drought impacts those farmers who were less focused on business, while drought conditions are managed by those more focused on business. So we found there were two groups really. There was those who saw themselves as a business and that drought was just another condition in which they had to work through. And those that felt more like drought was something that was big and large imposed upon them.

And so the absence of strategic decision-making results in a greater impact of drought. Active continuous decision-making minimises the impact of dry conditions. Those who report higher impacts are more likely to delay decisions on the basis of optimism that rain will come. Those who engage more with services advisors information achieve better farming outcomes. This coincides with an increase in the amount of online and in-person services advisors' information that is available to farmers.

There is an opportunity to promote the benefits of good business planning and engage directly with farmers to produce a farm business plan. And our research showed that those who planned felt more optimistic that they could manage through a drought and felt that it was something more within their control as opposed to those whose plan seemed to be more about waiting for the weather to turn or for the rain. Those who made active decision-making felt a lot more prepared for drought.

Kimberely Ohayon:
I guess off the back of the research and the other broader work you've been doing, is there any other advice you'd like to share with our listeners, particularly those who are in drought prone areas or maybe our members who have clients in farming areas?

Courtney Bryant:
Yeah, no, thank you. I think the main message for me would be that although most of the country is recovering from drought, and obviously a number of areas are suffering from flooding, we do know that with drought it's a case of when not if. And we need to be preparing while times are good. And I think we've seen between drought, bush fires and flooding over the recent years, there may not be big gaps for in which people can just focus and relax and focus on preparing. It's something we have to continually be involved in and continuing thinking about business planning continuously across a range of risks. There's no kind of... There may not be a break in which to do it.

And so we know as well that with the changing climate, it is likely that there'll be more frequent, longer lasting and intense droughts. So I think we all know that good advice leads to better decision making and that can make all the difference when the rain stops falling. And we all know that the decisions that you make when you have time to plan and think are probably better than the ones you have to make when you're under pressure and under stress.

So I would really encourage any of your members listening to this to think about how they can have those discussions with their farm businesses to open up that door to that conversation, to be thinking and planning ahead, and think about what role accountants can play to really be that trusted advisor that they can rely on across the range of drought conditions.

We also on the ground have a range of recovery support officers that are under the Australian Government's National Emergency Management Agency, and they're on the ground as well to help connect people up with programmes and services. So they're another good resource that people can be pointed to. And RecoveryConnect is a website that has been set up to kind of show the range of support available for drought, but also for the current floods and other disasters. So it's a really good resource for people to look at if they're wondering what is available for them in their area or region.

There's also just a range of programmes that are always open, always available. As I said before, drought is one of many risks and issues that come up for farmers, so we'd really encourage your members to be aware of those if they're appropriate for any of your clients. So things like income support under household allowance, and also the Rural Financial Counselling Service is a really positive service to help people who want to reflect on some of their financial considerations as well. The farm management deposits are obviously a really good resource for those who are having good years and want to put some money away for the not so good years. They're a really good resource available there to farmers as well to take advantage of.

Kimberely Ohayon:
Oh, well, thank you Courtney. We really appreciate your time and insights today, especially coming to talk to our listeners, but also for the continuing consultation and engagement with CPA Australia on these important issues. I'd also like to thank all of our members who are active contributors to this work as well. I'm pleased to say that CPA Australia has just released two new My Firm. My Future e-learning modules to further support our regional and rural members. One on drought support shared responsibility framework, which we've been discussing today. And one on succession planning for farming clients, which you can find on our website. If you've got a question about any of the topics that we've discussed, any of CPA Australia's policy and advocacy work, or if you'd like to suggest a topic with interest, please email [email protected]. Thank you again, Courtney, and from all of us here at CPA Australia, thanks for joining us.

Speaker 1:
Thank you for listening to this week's episode of With Interest. So you don't miss an episode, please subscribe to the CPA Australia podcast on Apple Podcasts, Spotify, or Google Podcasts.