Farm help to hit debt

30 Apr, 2013 04:00 AM
Federal Treasurer Wayne Swan.
Federal Treasurer Wayne Swan.

THE federal government has responded to vocal pressure from concerned farm groups by announcing a new Farm Finance package to address immediate business pressures from escalating farm debt and reduced profitability.

Federal Treasurer Wayne Swan and Agriculture Minister Joe Ludwig announced the new assistance package at the weekend, which contains four key planks.

The federal government will provide $60 million loans over two years to each State and the Northern Territory totalling $420 million, giving eligible farmers access to concessional loans of up to $650,000 each.

The package also provides an increase in the number of rural financial counsellors; a commitment to find a nationally consistent approach to farm debt mediation; and increasing the non-primary production income threshold for Farm Management Deposits (FMDs), from $65,000 to $100,000.

The announcement comes after 1000 farmers attended a debt crisis meeting in the WA Wheatbelt town of Merredin on April 15 and passed 12 resolutions calling for a range of State and federal assistance measures.

The following night, 180 farmers from Victoria, South Australia, NSW and Queensland attend a similar forum at Colac in Victoria and demanded an overhaul of agricultural economic policy to address escalating debt.

Similar pressures are also being felt by the northern cattle industry and various horticultural sectors, with the high Australian dollar and poor seasonal conditions wearing most of the blame.

Mr Swan said the package had been worked through with industry and would support Australian farmers who had good future prospects but were currently doing it tough.

He said viable farmers were struggling under the weight of a high Australian dollar and reduced land values.

“That means a lot of businesses, that are good businesses for the long-term, really need some breathing space,” Mr Swan said.

“They need some additional assistance and that’s what this Farm Finance package is all about - to provide some help to those farmers that are really battling against the headwinds of a high dollar and other factors within the overall rural environment.”

Mr Swan said the concessional loans up to $650,000 would be available for viable farmers to assist with debt restructuring.

Minister Ludwig said the new package was “good news for farmers right across Australia”.

He said he worked on the package with Mr Swan through the Farm Finance Rural Debt Roundtable convened late last year, following pressure from Queensland federal Independent MP Bob Katter.

“Right across Australia….you see farmers who have been very efficient and effective over a long period of time, got through drought and they find that with the high dollar, with depreciating land values, with high input costs, that they just need a little bit of assistance to be able to manage through this period,” Minister Ludwig said.

Minister Ludwig said he wanted to progress a consistent national approach to debt mediation between farmers and banks because only Victoria and NSW had appropriate legislation.

He said the National Rural Advisory Council had also recommended making FMDs more flexible for farmers with the new changes to bolster off-farm income to give farmers “an extra tool to manage through difficult times”.

Minister Ludwig said there were 110 Rural Financial Counsellors throughout Australia, doing a good job, and an additional 16 would now be appointed.

The government said it had written to the State and NT governments asking for their support in delivering components of the package and administering low interest loans through state delivery agencies, such as the Queensland Rural Adjustment Authority.

Mr Katter called on State and Territory governments to match the federal commitment.

He also heaped rare praise on the federal government for “sticking their neck out” in providing $420 million in concessional loans to struggling farmers.

Shadow Agriculture Minister John Cobb welcomed the “sensible” new package but said the proof would be in the pudding.

Mr Cobb said a number in the farming community were doing it really tough at the moment, including dairy farmers, stone fruit growers in Victoria, WA grain growers and northern cattle producers.

“For the government to finally recognise the problems of the farm sector is welcome,” he said.

“As for the initiatives they have announced, they look sensible but we will look at the detail and talk to the farm sector and evaluate whether the announcements hit the mark for the industry.

“Labor announced $100 million for the cattle farmers after they devastated the industry with their live export ban but less than $20 million was taken up by farmers because the criteria didn't allow many of those affected to access funding.

“The announcement is welcome but whether Labor can deliver only time will tell.”

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30/04/2013 8:22:32 AM

If farmers have to pay these loans back over two years, then this is of little help to their long term viability. To be of real help, they should be like the natural disaster loans - ie 12 year term, no interest or repayments for first two years to enable these businesses to budget repayments.
30/04/2013 8:53:56 AM

I have always wondered how rural financial counsellors help farmers. Has anyone benefited by these people?
30/04/2013 9:19:06 AM

Cannona: Noting these loans aren't "whole of farm" funding, but most likely smallish in the scheme of things, if they can't pay them back in 2 years they are likely not viable anyway. Trainspotter: Like any business, there are good RFCs and bad ones. The good ones do call a spade a spade - which might be telling overgeared farmers to sell. Other comment: Most farmers who can afford FMDs are not in need of help. It's the ones with gear to their ears, no cash, and should be exiting that need motivation to do so (or someone who can afford their land).
mike tancock
30/04/2013 10:16:10 AM

In order to obtain a loan, first of all you have to prove you don't need it. Let's address the farmers who, through circumstances beyond their control, have diminished equity and do not interest providers on carry-on finance be they banks or quasi government agencies
30/04/2013 10:31:32 AM

Best thing the government could do is let the non viable ones go broke. Then their farms would be run by someone who is viable.
30/04/2013 11:20:01 AM

The notion of ‘breathing space’ has been used to justify such packages for a very long time. The pressures aren’t short term trends; there have always been pressures which have persisted over the longer period. Research points to such policy implements failing to lead to viable enterprises, Sound economic policy that redressed market inequalities is a better instrument to use. The only winners from cheap loan schemes are politicians (including agro-politicians) who put them forward, they want cudos so as to get votes.
30/04/2013 11:25:33 AM

Dickytiger, on one level you are correct. However, in managing the situation the Rural Financial Counsellors should point to financial reality and help people see their situation whilst the Rural Assistance Authority helps them leave with some dignity left. Stop trying to keep people in Agriculture who are a ‘wicket on to a hiding’!
30/04/2013 11:30:21 AM

It makes more sense for the government to buy land (or encourage superfunds to buy farmland) in areas where prices have slumped 30% +, allowing those farmers to exit, the banks have provisioned and can take a bit of a hit, then the govt/superfund can lease the land to back to the stronger farmers or even sell to them on attractive terms. The return from leasing alone in the wheatbelt is often 6% or so, so it's not wasted money, but invested smartly, and this keeps the land in Australian hands and lets the farmers who need to leave to move on. To start, $70m could buy more than 200,000 acres.
30/04/2013 12:29:46 PM

Well at least he's doing something even if its not enough. I tell you what, why don't you ask John Cobb what he would do? He couldn't spin a decent fairy tale. If anyone had seen his performance in Warrnambool months back you would worried about the calibre of people we are electing to run this country!
30/04/2013 12:52:47 PM

DickyTiger: It is quite evident that you have no idea regarding the financing strain on farming enterprises in this country. Yes I do agree that those who are not viable should consider their options, however with the diminishing value of rural land values and the banks positioning on rural lending, finding someone with the capacity to take on some of these operations is limited. The banks want at least 40% in equity before they even entertain the idea of a rural loan. The Qld Rural Adjustment Authority for a new industry starter package requires you to have 50% equity. No farmers = No food.
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