WATER REFORM HAS CREATED UNCERTAINTY IN RURAL LENDING Sydney, 6 May, 2002: The Australian Bankers’ Association (ABA) is concerned that the NSW water reform process is yet to deliver adequate tenure of water property rights and has failed to adequately consider structural adjustment issues for water users. David Bell, Chief Executive of the ABA, said: “The water reform process breaks the historic relationship between water and land creating a new form of property right – water access licenses.  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 property 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 property right if they are to accept it as it as security for lending.  If the tenure of the property right does not roll over from year to year then its value as security for a loan will erode over the period it is issued.” Mr Bell said the implementation of water reform in NSW has the potential to create significant adjustment pressures for irrigated agricultural industries and the communities that depend upon them. “Reduced water allocation may effect the ability of the farmer to service loan commitments. In the event that the amount of water available to a farmer is significantly decreased, then the choices are to either plant less crop, purchase more water licences or to invest in significantly improved irrigation technology.” The consequences that flow from this are as follows: if a farmer has borrowed on the basis on an expected area of crop then that farmer may have difficulty in servicing the current loan commitments; if a farmer has to either purchase more water or invest in new technology, the farmer may have to increase their level of debt, resulting in the farmer servicing a larger debt from the same area of crop and level of income; the ability of the farmer to adapt will depend on their current level of commitment to their bank – if the bank will not allow further increases, then the farmer simply may be unable to adapt to the changes brought the water reform. “The NSW Government must provide an adjustment package to offset the negative impact from changes to water allocation for water users and regional communities. However, there has been good progress made with the NSW Government on the development of a registry for water property rights.” For further information contact: Heather Wellard ABA PR Phone: 02 8298 0411 Mobile: 0409 830 439 ENDS