Multibillion-dollar recovery package resembles proposal by Bob Katter, who had threatened to help Labor recall parliament unless the government stepped up

This article is more than 1 year old

This article is more than 1 year old

Scott Morrison will announce a multibillion-dollar north Queensland flood recovery package based on low-interest loans to be repaid by cattle farmers after rebuilding their stocks.

Morrison is travelling to to Townsville on Friday to unveil the package, which also includes a doubling of assistance for flood-affected small businesses from $25,000 to $50,000.

The policy – including the establishment of a north Queensland livestock industry recovery agency – closely resembles a proposal by independent MP Bob Katter, who threatened to help Labor recall parliament unless the government set up a cattle reconstruction board to give low-interest loans to farmers.

Play Video 0:35 Aerial footage of dead cows after Queensland flood – video

While initial news reports in the Courier Mail and the Australian valued the package at up to $2bn, Morrison suggested the government’s commitment is open-ended, telling Radio National it will “do what is necessary” when asked if a budget allocation had been made.

“We don’t [have a final price tag],” he said. “Because we still don’t even know now the full extent of the losses.

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“There’s been estimates of half a million stock losses, but I’ve heard higher than that, and the water is still draining – when I was up there a little while ago stock was still dying from pneumonia.”

Morrison said the policy will consist of restructuring existing loans and restocking herds through a combination of grants and loans, to be made either through banks or the Regional Investment Corporation.

The prime minister said the government would use a form of guarantee to underwrite bank loans and “reduce the cost of funds”.

“All of that cost of funds will be passed on to each of the farmers in their restructuring of their existing debts, and that is the same for the restocking loans as well.”

Interest rates will “depend on people’s holdings” but would be “a hell of a lot lower than they’re paying right now, basically on what the cost of funds is”, Morrison said.

“[It will be at the rates] the government gets, which at the moment is about 2.7% to 3%, but in some cases you can structure the debt so it can be as low as 1%.”

Morrison said the policy will help graziers rebuild “station by station, farm by farm”, suggesting that different recovery plans will be needed for each business. He said farmers “don’t want compensation, [they] want reconstruction”.

Katter took credit, saying in a statement the catalyst for the decision was his invitation to the prime minister to visit Julia Creek and Cloncurry.

“So after 25 years of battle, we have got an enlightened government decision,” Katter said

“All these people will have their debt significantly reduced, and will now be paying one third of what they were currently paying to the banks (until now). And all of this is costing the tax payers nothing.”

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In February Morrison said he was working with Katter on the issue “because the northern Australian cattle industry needs our support”, rebuffing suggestions the negotiations were designed to avoid extra sitting weeks.

In November Katter and Morrison reached a deal in which he agreed to provide $200m for water projects to shore up Katter’s support in the House of Representatives following the loss of the government’s lower house majority.

In February Morrison hinted he could revoke the deal if the maverick MP sided with Labor and fellow crossbenchers to support an extension of the parliamentary sitting calendar against the government’s wishes.