Ag green paper rejects ARDB push

22 Oct, 2014 01:55 PM
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2
 
Barnaby Joyce.
There’s no point burning energy on something that you don’t think is going to happen
Barnaby Joyce.

THE federal government’s Agricultural Competitiveness Green Paper has bluntly rejected the long-running Australian Reconstruction and Development Board (ARDB) proposal.

The ARDB was pushed by the Rural Financial Roundtable Working Group as a means of tackling declining farm viability in specific sectors like the northern beef cattle industry, to help avoid a mass exodus of debt-stricken farmers.

The ARDB push resulted in legislation being tabled in federal parliament late last year by independent Senators Nick Xenophon and John Madigan.

An ongoing inquiry into the proposal by the Senate economic committee was granted an extension to report on December 4, after submissions closed on February 10.

The legislation seeks to amend the Reserve Bank Act (1959) to establish the ARDB as the third board within the Reserve Bank of Australia.

The board would aim to develop greater financial resilience in agriculture and associated industries with targeted lending around droughts and other natural disasters.

But the ARDB concept was knocked on the head in the green paper released this week under the chapter five, “Finance, business structures and taxation”.

“Stakeholders suggested creating a rural reconstruction bank to provide concessional loans,” the paper said.

“The government has no plans to progress this proposal.

“The issue is currently being considered by the Senate Economics Legislation Committee.”

Speaking to media, Agriculture Minister Barnaby Joyce would not be drawn on what proposals were omitted from the green paper via the cabinet process, like the ARDB, yet may be re-included in the final white paper pending stakeholder reaction.

“I represent what comes out of cabinet and I stand right behind this green paper,” he said.

“I think this is a formidable paper – it has a whole range of issues that have been thought of and the expertise surrounds them in such a way that I believe many of them can progress to a white paper.

“I know there was a lot of interest in a rural reconstruction bank but you have to call it for what it is.

“I don’t think that has the capacity to get up, so there’s no point burning energy on something that you don’t think is going to happen.”

Mr Joyce said up to $700 million had been approved for government lending in concessional loans, including the recent drought package that’s providing $280 million in loans at 4 per cent for eligible businesses.

Farmers feeling stress

The National Farmers' Federation (NFF) submission to the ARDB Senate inquiry called for “considerable investigation and analysis” of the concept, “particularly in relation to the impact any such entity might have on the broader financial markets, farm sector financial instruments and risk management strategies”.

“It is clear that there are some concerns relating to the increased rural debt levels in the last decade – rising by over 85 per cent since 2002-03,” the NFF said.

“While capital investments ideally hold farmers in good stead into the future, total farm debt levels at above $60 billion place the agricultural sector at considerable exposure to increasing credit costs and ongoing viability.

“Tightening monetary policies are also having an increasing impact on Australian farmers and posing challenges for the agricultural sector.

“The NFF believes there is an ongoing need to investigate options for the farm sector to continue to access affordable capital, improve global competitiveness and innovation.

“These measures should include improving transparency in the banking sector, a review and audit of tax based investment mechanisms for regional Australia and building the education and awareness of risk management tools for farmers.”

ANZ’s white paper submission, quoted in chapter five of the green paper, said: “Farmers at the lower performing end are feeling stress, while the higher end of the market is making good returns”.

“Public policy to consider how to help those businesses in the middle of the market lift their performance is critical,” ANZ said.

“This may include improving skills in financial governance, balance sheet and asset management, and business performance.”

The green paper also said stakeholders had suggested extending the Farm Finance Concessional Loans Scheme on a permanent basis to improve sector profitability and support farmers facing difficult circumstances.

It said some stakeholders suggested the scheme had increased competition for the banks, encouraging them to lower their interest rates.

However, there is a risk that a permanent concessional lending facility would encourage farmers to take on more debt, crowd out commercial lenders and impede adjustment in the agriculture sector, the paper said.

“It would be important to ensure that any permanent scheme was focused on long-term viable farms, or it will only serve to prop up farms that are underperforming and subject to high financial risk,” the green paper said.

An income-contingent loans scheme, either for the broader agriculture sector or for specific groups such as young farmers, was also suggested in the green paper chapter five, involving loans with debt repayment directly linked to income.

“The government encourages the financial sector and industry to continue to consider such financial innovations,” it said.

“However, a government-supported scheme of this nature would have the same problems as the permanent provision of concessional loans.”

Chapter five also encouraged stakeholder feedback on proposed changes to the Farm Management Deposits (FMD) Scheme, with submissions to the final white paper due to close on December 12.

The proposed FMD changes included increasing the $400,000 deposit limit potentially to $1 million; increasing the $100,000 off-farm income cap; extending eligibility to companies and trusts; and re-establishing early access provisions for times of drought.

“Further increasing the off-farm income cap would ensure that farmers were not penalised for seeking off-farm income as an alternative risk management practice,” the paper said.

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Colin Bettles

Colin Bettles

is the national political writer for Fairfax Agricultural Media
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READER COMMENTS

John from Tamworth
22/10/2014 2:47:59 PM

The Minister deserves some kudos for finally knocking this deformed calf on the head.Debt and agriculture don't mix and society shouldn't be expected to bail out those who have miscalculated.
Bushfire Blonde
22/10/2014 7:01:28 PM

Has anybody had a good look at all of the good that the QIDC did in Queensland and could somebody please explain why the same thing would not happen on a National scale?

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