By Colin Packham
SYDNEY (Reuters) - Australia will offer farmers hurt by drought up to A$1 billion ($688.10 million) in cheap loans and grants, Prime Minister Scott Morrison is expected to announce on Thursday, as the government seeks to curb rising discontent from rural voters.
Farmers across Australia's east coast have been battling drought conditions for more than three years, wilting agricultural production and leaving some towns on the brink of running out of drinking water supplies.
With growing anger amongst the conservative government's traditional voter base, Morrison will pledge new financial aid, including temporary interest free loans, designed to allow farmers to stave-off bankruptcy.
"We have been back on the ground listening to farmers and their communities, and this package is a direct response to their feedback," Morrison will say, according to prepared remarks seen by Reuters.
"This is money in the pockets of our farmers to help keep their stock fed and watered, their staff and farm hands paid and their crops irrigated."
Any small business deemed to be dependant on agriculture will be eligible for a concessional loans of up to A$500,000, payable over 10 years.
To ease the financial burden, the government said there will be no interest payable over the first two years of the loan, while businesses will then pay only interest on the loan between years three to five. Principal and interest payments will then be due from year six.
The financial aid package is being announced just weeks before the grain harvest, which typically begins in December.
Australia is among the world's top 10 exporters of the grain, the largest part of the country's agricultural sector that typically contributes about 2% to GDP.
But with almost no rain in recent months across New South Wales and Queensland, farmers do not expect to harvest any meaningful supplies, curtailing rural exports.
INTL FCStone on Wednesday said its poll of an unspecified number of clients pegged Australian wheat production at 15.54 million tonnes, 19.1% lower than Australia's official estimate of 19.2 million tonnes.
With lower production, Australia - typically one of the world's largest exporters - is also likely to lose greater market share in lucrative markets such as Indonesia and South Korea at a time of falling prices.