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Sydney, 19 November, 2003: The Australian Bankers’ Association (ABA) said farm finances are in reasonably good shape, with the banks reporting a low level of poorly performing loans, despite the continuing impact of the drought.
The ABA and member banks provided an update on farm finances at yesterday’s Agricultural Farm Finance Forum meeting, chaired by Parliamentary Secretary to the Minister for Agriculture, Fisheries and Forestry, Senator Judith Troeth.
The Forum, held in Canberra, comprised high-level representatives from the farming and agri-finance sectors, including the ABA, the major banks, the National Farmers' Federation, leading pastoral houses, rural financial counsellors and accountants.
David Bell, Chief Executive of the ABA, said: “Farm Management Deposits (see notes for editors) are being accessed as many rural communities start to recover from this devastating drought. Banks have reported that demand for farm credit is picking up as rainfall conditions return to normal in some parts of the country.”
“There is recognition by the banking sector that recovery has been patchy across the nation and that parts of New South Wales and Queensland are still experiencing very dry conditions.”
Water access entitlements were also another important issue discussed at the Forum and the ABA agrees with Senator Troeth that the continuing uncertainties regarding the use of the entitlement by farmers to obtain access to finance needs to be addressed.
Mr Bell said the water reform process is yet to deliver adequate tenure of water rights for the agricultural sector.
“The water reform process breaks the historic relationship between water and land, creating a new form of statutory right – water access licences. The value of water used in many irrigation enterprises is now much higher than the value of land used in those enterprises. It is therefore important that irrigators are able to use this new right in the same way that land is used to secure access to finance.”
“Banks need to be confident about the tenure and validity of the right if they are to accept it as security for lending. If the tenure of the right does not roll over from year to year then its value as security for a loan might erode over the period it is issued.”
The ABA and member banks support policies for the sustainable resource management of water nationally. The separation of water from land is a positive move because it will define entitlements, clarify water’s value and enable trading so it will flow to its most valuable use. The ABA will continue to work closely with State and Federal Governments in an effort to resolve some of these uncertainties.
The ABA supported Senator Troeth’s concerns on how Financial Services Reform (FSR) may have unintended consequences for farmers in managing financial risk. For example, there are potentially onerous regulatory requirements that could operate as a barrier to the efficient provision of risk management products, such as currency hedging products by banks to their customers.
Notes for editors:
• Farm Management Deposits are a cash flow management tool that complement other risk management options by allowing agribusinesses to set aside pre-tax primary production income in profitable years to help balance farm income between good and bad years. They also provide tax benefits if kept for a minimum of twelve months (FMD holders in Exceptional Circumstances declared areas are exempt). Interest is earned on the full amount of the deposit at market interest rates. The money deposited can be withdrawn in later years when it is needed - often in a lower income, lower tax year.
For further information:
Heather Wellard
ABA Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
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