Bipartisan commitment for banking reforms vital for future of farming

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Bipartisan commitment for banking reforms vital for future of farming
Tuesday, 5 Feb 2019

AgForce CEO Michael Guerin says the extraordinary weather events being experienced across Queensland - with many producers still suffering from long-term drought while others watched their properties and livestock being washed away - underlined just how critical was reform of the banking sector.

Mr Guerin said AgForce was fully supportive of the underlying intent of many of the Banking Royal Commission recommendations to ensure banks involved in rural lending demonstrate fairness, compassion, patience and knowledge of the industry.

AgForce said the much-needed reform offered by the recommendations was critical to ensure recovery from natural disasters, continued strong growth in the sector and to safeguard the livelihoods of farmers.

"We hope both the Government and Opposition will now demonstrate the leadership and strength of character to commit to their implementation," Mr Guerin, a former banking professional, said.

"It is impossible to overstate the importance to the future of this sector of farmers being able to have confidence in our banking sector."

Nationally, the agriculture industry has a target of increasing farmgate production to $100 billion annually by 2030, a significant 33 per cent increase on current levels.

"To achieve this stretch goal, we need to have a transparent, fair, consistent and collaborative relationship with the banking sector and the essential services it provides," Mr Guerin said.

"Debt financing is critical to the Queensland agriculture industry. Without good access to fair debt finance, many farmers would not be able to finance investment in their property or maintain working capital."

Nationally, 96 per cent of agricultural lending is with banks.

"In particular, we support the establishment of a national farm debt mediation scheme to ensure co-operative resolution of financial problems as they arise, with access for farmers to affordable professional support to negotiate the best outcome," he said.

"We strongly support an end to the charging of default interest when there is no reasonable prospect of recovering the amount charged. This practice has been the source of much angst for farmers with failing loans.

"Increased transparency around asset valuation processes is also important, to ensure the fair value of assets, including property and equipment, is realised if it has to be sold."

Mr Guerin said the industry recognised the vital role of banks in their industry, but just asked for fairness and understanding.

"The prolonged and severe drought - not to mention other natural disasters our producers have recently or are currently experiencing - has taken an enormous financial, environmental and emotional toll on farming families across Queensland. 

"Farmers will need the support of their lenders to ensure their recovery, a process that will take years, not months."

"We need banks to understand the unique characteristics of agricultural businesses and the highly variable environment they operate in," Mr Guerin said. 

However, despite the constantly changing conditions like we are currently seeing, farmers have worked hard to manage their risks and improve their financial resilience and the industry has an appetite to continue to invest and develop further.

Queensland government data from 2017 (1) showed that about 95 pc of the total value of rural debt is viable or potentially viable in the long term, a solid foundation given a seven-year severe and widespread drought.

"We must ensure that the partnership between banks and farmers is respected and characterised by ethical conduct and strong communication. 

"In achieving this we must set a framework that also maximises access to finance and a level of risk taking that allows for innovation and industry and individual growth. 

"It is a fine balancing act but one we must succeed at."

(1) Queensland Rural Debt Survey 2017

Ends.

MEDIA CONTACTS: David Vogler 0418 733 102, Hannah Leu 0430 550 640

Bipartisan commitment for banking reforms vital for future of farming

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