Ag sector welcomes interest rate cut

Beef Central, 01/11/2011

The National Farmers Federation has welcomed today’s announcement by the Reserve Bank of Australia that interest rates will be cut by 25 basis points to 4.5 percent.

NFF president Jock Laurie said in a statement issued this morning  that the reduction in interest rates, the first since April 2009, was very welcome news for the agricultural sector.

“What we’re currently seeing is a very positive outlook for farmers and for agriculture. While there are still challenging seasonal conditions facing some parts of the sector, in many ways, the current conditions for most are very positive,” Mr Laurie said.

“Australian farmers and graziers are heavily exposed to interest rate movements, more so than many other sectors due to our large levels of farm debt after a decade of drought and, more recently, natural disasters. Today’s interest rate cut means farmers will be better placed to meet their financial obligations."

“It is also good news for primary producers as it means less pressure on the Australian dollar, which is currently sitting at US105c after reaching highs of US110c earlier this year.

“We know that every one percent appreciation in the Australian dollar pushes our farm income down by around $220 million in raw terms, due to our high reliance on export markets. So a weakening Australian dollar and an interest rate cut combined spell good news for the sector."

“Of course, what we now await with interest is the reaction of the banks to this rate cut."

The NFF Agribusiness Loan Monitor was introduced in June this year to monitor the movements in agribusiness rates against the RBA official interest rates and to provide a tool for farmers to compare the loans available from the different financial institutions.

“As rates have been on hold since the introduction of the Monitor, this month will be the first time we are able to check if financial institutions reduce their loan rates in response to the official rate. We look forward to seeing the response from the banks and providing this information to farmers and graziers,” Mr Laurie said.

  • Most major lenders have indicated they will pass on the entire 25 basis point rate change to clients. The exception is National Australia Bank, which has capped the reduction at 20 basis points. 


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