Nationals leader Warren Truss has launched an attack on the treatment of farmers by Australia’s banks, saying that while Australian home owners anticipate interest rate cuts, farmers have all but given up hope of seeing RBA cuts reflected in agribusiness loans.

However the banking sector has defended itself from the claims, saying the sector has absorbed increasing costs and that business loans are more expensive to fund than home loans.

Mr Truss said banks were fast to pass on interest rate rises in full to consumers, but “notoriously tardy” in providing relief when interest rates went down.

“But it’s even worse for Australian farmers," Mr Truss said.

"With attention on mortgage rates, agribusiness loans slip under the radar and the banks are getting away with not passing on cuts."

“Despite successive official rate cuts of 0.25pc in November and December last year, farmers were shafted. Only Suncorp Agribusiness, to its credit, passed on the full 0.5pc cut to its farm loan holders.

“But ANZ Agribusiness, Commonwealth Bank Agri, NAB Agri, Bananacoast Community Credit Union, Bendigo Bank and Westpac Agribusiness only passed on miserly partial cuts.

“Others, like BankSA Agribusiness, simply abandoned our farmers and hoped no one will notice that they failed to pass on any cut at all.”

Farmers were drained after a decade of drought and more recently destructive flooding, and found it especially galling that rate cuts designed to relieve these economic hardships were specifically denied to them.

“I will also be watching what happens to the real rates paid on agribusiness loans. Light must be shed light on the agri-banking sector.

“For small businesses, including farmers, it is increasingly difficult to keep tabs on and compare loan rates and bank products. Unless the rate decisions of banks and non-bank financial institutions on these loans are required to be publicly reported, affected businesses will remain financially in the dark.”

In response, Steven Münchenberg, chief executive officer of the Australian Bankers’ Association, said banks had been absorbing higher costs for the past six months.

“As a result of the global financial crisis there is no longer a 1:1 relationship between Australian bank funding cost and changes in the RBA cash rate.”

“Banks have been absorbing increased funding costs for the past six months and in passing on reductions in interest rates when the RBA reduces the cash rate.”

“Banks need to remain stable and maintain their current levels of profitability to attract funds from overseas investors at reasonable rates.”

“If bank profitability decreases, costs may need to be cut which could impact on the provision of services and it is likely that credit may need to be rationed as is the situation overseas.”

“It is easier for banks to pass on some of the reduction in cash rates to households because there is less risk in lending to households for mortgages which means that banks are required to hold less capital when they lend to households.”

“Capital required by the Australian Prudential Regulation Authority (APRA) to be held by banks for business loans is generally much higher than for home loans.  This means business loans are more expensive than home loans to fund.”