BANKS CONTINUE TO ASSIST RURAL COMMUNITIES ON DROUGHT MANAGEMENT

Sydney, 10 May, 2005: The Australian Bankers’ Association (ABA) said the banking sector recognises the seriousness of this drought and will continue supporting viable farmers.

The ABA has noted that the National Farmers’ Federation (NFF) has recently said that a significant number of producers are facing their fourth crop failure in a row, putting pressure on extended finances.

David Bell, Chief Executive of the ABA, is urging any bank customer who is worrying about the impact of the drought on their financial position to contact their bank, if they have not already done so.

“Banks manage the impact of drought on customers on a case-by-case basis reflecting varying impacts and options available to individual customers.  The financial position of individual customers varies and this determines the options that are available.”

Banks have been providing our rural communities with special consideration and understanding during this difficult period by examining a customer’s circumstances on a case-by-case basis. The banks’ drought relief packages provide practical help by giving immediate financial relief to those in most need of assistance and improving prospects for maintaining a viable farming business.

During drought:

• farmers and rural businesses will want to identify and manage all costs that can be deferred in the short-term;
• in some cases, individual banks may, as a short-term measure, typically lend farmers carry-on finance to enable shortfalls in cash flow to be met;
• farmers that already have significant debt need to be prepared to draw on financial reserves such as Farm Management Deposits, investments in managed funds and other forms of off-farm investments;
• in some cases, to help reduce cash outgoings, individual banks may put in place the short-term measure of restructuring existing loans so as to reduce annual debt repayments - this may involve extending the term of a loan or allowing interest-only payments for a period of time.

Banks recognise that drought is a part of the normal business cycle of farming and understand its short-term impact on farm incomes. For customers receiving Federal Government interest rate subsidies, it is the general practice of banks not to increase credit risk margins on loans, where customers comply with usual bank requirements.

Banks have and will continue to work with Governments that provide assistance to farmers and rural communities in times of drought in the form of interest rate subsidies, fodder subsidies, fodder transport subsidies, livestock transport subsides, crop planting grants, general grants, unemployment benefits and Austudy assistance.

Reports from the Bureau of Meteorology on the Southern Oscillation Index, a key climate indicator, have been signifying the chance of an El Niño  episode this year is estimated at between 30% and 50%, which means that the risk is around double what may normally be expected at this time of year.

The Bureau notes this higher than normal risk of an El Niño¹ episode can be associated with persistently low rainfall levels across Australia.
Farmers will be considering this forecast and other factors when deciding whether to incur the cost of planting winter crops in drought-affected areas.



For further information:

Heather Wellard
Director, ABA Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
 

ENDS



¹ A climatic event involving rapid warming of the surface of the southern Pacific Ocean causing a change in normal wind and current movements, and having far-reaching effects on the world’s weather, in particular causing drought on the eastern coast of Australia.