The average level of debt increased by four per cent in south-west Queensland and 12 per cent in north-west New South Wales during 2013–14, according to a new report commissioned by Minister for Agriculture, Barnaby Joyce.
Minister Joyce said the number of farm businesses with difficulty servicing their debt in some regions was also rising.
“In September, Treasurer Joe Hockey and I visited areas of New South Wales and Queensland to hear first-hand about the impact of drought,” Minister Joyce said.
“That visit was followed by a meeting of the Agricultural Finance Forum, where we made a commitment to undertake this study to address the lack of detailed information available on debt levels.
Minister Joyce said that in the northern Queensland gulf region, the proportion of borrowers more than 90 days in arrears servicing their bank loan increased from 1.9 per cent at 30 June 2012 to 3.4 per cent at 30 June 2014. In the north-west New South Wales region, that proportion increased from 2.2 per cent to 4 per cent.
At the national level, 3 per cent of the total value of the agriculture, fisheries and forestry sector loans was more than 90 days in arrears at 30 June 2013, compared to an average of approximately 2 per cent in all other business sectors.
“Nationwide, repayment of agricultural debt is comparable to other sectors – but the results vary significantly by region,” Minister Joyce said.
“Average farm debt is projected to increase in 2014–15 by around 5 per cent overall in the regions studied in this report, as you would expect in areas so dramatically affected by prolonged drought.”
In the northern Queensland gulf region, north-west New South Wales and in south-west Queensland, farmers are expected to consume, on average, in excess of 15 per cent of farm receipts to meet interest payments in 2014–15.
“We must remember that this is gross farm receipts that we are talking about and 15 per cent is historically high for these regions. This compares with an average of around 8 to 9 per cent for broadacre farms nationally in recent years,” Minister Joyce said.
“Drought not only puts greater pressure on farm debt, it reduces the ability of farmers to service that debt—the real problem is a lack of profitability due to drought and poor cattle prices.”
Minister Joyce said the Coalition Government was working on a number of fronts to address the real issues, with strong results.
“In our first year of government we have opened four new live export markets –Bahrain, Iran, Egypt and Cambodia – and negotiated free trade agreements with three of our largest agricultural exports markets – China, Japan and Korea,” Minister Joyce said.
“There is high demand for Australian cattle. Increasing competition and opportunity through better market access is the best way we can drive better returns at the farm gate.”
Other key outcomes of the Agricultural Finance Forum designed to assist drought-affected farmers are also well advanced.
“Today the Coalition Government announced a targeted $100 million drought recovery loan for farm businesses that will fund planting and restocking activities to help farm businesses crippled by the effects of drought return to normal operations,” Minister Joyce said.
“In Queensland, this scheme will also help those impacted by drought and the mid-2011 disruption to live cattle exports to Indonesia.
“We have also established a Farm Debt Mediation Discussion Group to progress the development of a nationally consistent Farm Debt Mediation scheme.
“The task of assessing the requirements for a consistent and effective scheme across the nation has already begun.
“Farm exports were worth approximately $41 billion to the Australian economy in 2013–14. We need to ensure that farmers with long-term investments in our national economy can continue to make that contribution into the future.”
When Labor left office, only 8 Farm Finance loans had been approved. Since the Coalition Government came to office, loans valued at over $217 million have been approved for 430 farm businesses across Australia under the Farm Finance and Drought Concessional Loans Schemes.
Also, the Coalition Government’s more flexible Farm Household Allowance means that 4395 farmers are accessing much needed income support – this compares with only 367 families under Labor’s poorly designed and difficult to access Transitional Farm Family Payment.
Regional Farm Debt: northern Queensland gulf, south-west Queensland and north-west New South Wales is a joint report by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), the Australian Bankers’ Association and the National Farmers’ Federation.
Source: Minister for Agriculture Barnaby Joyce. The full report is available online, at agriculture.gov.au/abares/publications. Information on assistance for farmers and farming businesses can be found at agriculture.gov.au/drought.