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Drought may spark food price hike

Farms across large areas of the country face a looming crisis
Farms across large areas of the country face a looming crisis

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SYDNEY, Australia -- All but one percent of Australia's most populous state, New South Wales, has been bit by the country's worst drought in a century, with retailers warning that if rain does not fall soon, the country will likely face massive food price hikes.

Calling for increased federal aid to assist crisis-hit farmers, state Premier Bob Carr told the New South Wales legislature on Tuesday the dry spell was already the worst since the "Great Drought" of 1895-1903.

With forecasters predicting a worsening of the situation before the expected end of the El Nino weather cycle sometime in April, analysts say the Australian economy could suffer badly without urgent government action.

Across the drought belt, huge swathes of crops have been wiped out and farmers have already resorted to slaughtering some of their prime breeding stock because of soaring feed prices.

In addition to New South Wales, agriculture in the neighboring states of Victoria and Queensland has also been hit hard by the drought, slashing production and threatening key Australian exports.

On Monday the Reserve Bank of Australia warned that on current predictions, the drought would cut at least one percent off the expected four percent growth forecast for Australia's hitherto relatively robust economy.

Price rises

That was followed by a warning from retailers Tuesday that a continued drought would likely force food prices up between 10 and 20 percent, with meat prices expected to rise the most.

Speaking in the state parliament, Premier Carr called on Australia's federal government to remove red tape preventing farmers from accessing emergency funding from a pool established in 1999.

At present, he said, farmers who made a deposit into the $547 million pool within the past 12 months were penalized if they made a withdrawal.

"That means today there are millions sitting in accounts while farmers watch their crops wither on the ground," Carr said.

In addition, he said, the government should act quickly to provide funding to farmers under the so-called Exceptional Circumstances consideration.

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