The National Farmers Federation’s first Agribusiness Loan Monitor assessment for 2012 shows that all financial institutions examined, bar one, have reduced their agribusiness rates in the last two months.
BananaCoast Credit Union, Bendigo Bank and Suncorp have all reduced their term rates by 0.50 percent since December, while reductions from the other banks varied from 0.25pc to 0.37pc during the period to February 17.
The Commonwealth Bank is the only bank not to have made a reduction in agribusiness term rates in this period; however it did pass on the initial Reserve Bank of Australia (RBA) rate cut of 0.25pc in November, NFF’s report says.
NFF’s economics committee chair John McKillop said in February, the RBA chose to leave interest rates on hold at 4.25pc, after reductions of 0.25pc in both November and December.
“What the February Agribusiness Loan Monitor shows is that the banks are slowly passing these rate cuts on to their farming and agricultural business customers,” he said.
“Some banks, like the Commonwealth, ANZ, NAB and Suncorp were quick to reduce rates back in November, while others, like BankSA and BankWest are only just passing rate cuts on now – and not necessarily the full 0.50pc,” Mr McKillop said.
The Monitor was originally created to provide transparency for farmers as to how the banks are adjusting their agribusiness loan rates and to help them make informed decisions about their finances.
“A positive outcome from this is that the banks are now under pressure to ensure they pass on rate cuts to their agricultural customers, and to show that they’re doing so in timely way,” Mr McKillop said.
NFF partners with financial research group Canstar to deliver the Loan Monitor, and the data for each is collected by Canstar eight business days after the RBA’s rate decision, giving banks plenty of time to adjust their agricultural term loan and overdraft rates.
“Of course, we’re now entering an unprecedented time in Australia’s banking sector. In the last month, a number of rural lending institutions have taken the bold step of making unilateral changes to their interest rates – rather than the traditional practice of aligning interest rate changes to those made by the RBA,” Mr McKillop said.
“We may be entering a whole new paradigm in terms of how banks manage their rate decisions – which reinforces the need for an ongoing monitoring system like the Loan Monitor, to track the interest rate movements by the banks even in those months when the RBA holds rates steady.”
NFF’s Agribusiness Loan Monitor for February is available from the NFF website, click here.