The Farm Debt Mediation Scheme had significantly reduced friction between banks and farmers, faced in other states, according to Mr Jochinke and leading rural financial counsellors.
“It’s a good initiative that should be picked up nationwide,”Mr Jochinke said. “It does give everyone options, instead of going straight for the hammer.’
He said the most recent problems between banks and farmers arose during the dairy crisis, when major processors Murray Goulburn (MG) and retrospectively slashed farmgate milk prices.
But he said while the Banking Royal Commission may not need to extend its terms of reference to look at bank-farm relationships, the financial sector needed to be clearer about lenders’ obligations.
“We want to make sure farmers don’t have undue force put on them to make a rash decision and actually have a controlled exit, if they are to go that way,” Mr Jochinke said. “With the best of intentions, you may not be able to trade your way out of difficulties. Such people have to have a chance to graciously take a controlled exit.”
He said he wasn’t sure if the Royal Commission would have the time to give the full attention that such issues deserved. “It’s not necessarily the banks but it’s the attitude of lenders to the agricultural sector and how they can fully equip people, taking out loans, to understand their obligations,” he said.
“I wouldn’t say there is a looming crisis in agriculture, but we have to make sure the checks and balances are in place.”
The Wimmera South West Rural Financial Counselling service’s executive officer David Stafford said the farm debt mediation process had helped considerably. “It makes sure there is an even playing field and gives clients options, as the banks have procedures to follow,” Mr Strafford said. “I think it’s successful, as we haven’t really had any issues, in that regard.”
Gippsland Rural Financial Counselling Service Victoria executive officer Kylie Holmes said the state scheme provided a “really good process for farmers.”