A regional NSW local government has put forth a proposal which, despite aiming to help farmers, would actually make them worse off.

Wollondilly Shire Council is considering the implementation of an “Agricultural Enterprise Credit Scheme” (AEC). This involves the creation of nominal credits, which are awarded to farmers according to their productivity.

Developers are then required to purchase the credits in order to progress project approval applications. The purpose of the AEC is to provide financial support to farmers and promote the use of land for farming rather than development, with agriculture being a traditional part of the region.

However, this policy would be damaging to both developers and farmers.

Firstly, it creates yet another regulatory hurdle in the already burdensome application process for development projects.

Housing affordability in NSW is already a major issue, and placing yet more restrictions on supply further disincentivises development when home ownership is already increasingly out of reach for average-income earners.

In addition, the scheme will also penalise farmers who wish to sell their land.

By adding a further expense on development, the scheme will force up costs and thus discourage developers from purchasing property.

While some may think of this as being a good thing, this hurts farmers looking to sell, which many are opting to do because of a combination of high debt levels and falling food prices.

As such, although the policy aims to support farmers, instead it undermines their capacity to make decisions in their interests.

This proposal is a typical case of how good intentions do not necessarily lead to good policy.

An AEC would increase development costs and restrict farmers’ choices. Instead, governments should be seeking to reduce costs and increase choice by eliminating overregulation in agriculture and housing.