The National Farmers’ Federation (NFF) has welcomed the Reserve Bank of Australia’s (RBA’s) decision to cut interest rates by a further 0.25 percent, bringing rates to yet another historic low at 2.5 percent.
“Today’s RBA cut takes rates down to the lowest they have been in 53 years – great news for farmers, agribusinesses and indeed all borrowers,” NFF President Duncan Fraser said. “We urge all banks to pass today’s rate cut on in full.”
Mr Fraser’s comments come as the NFF releases the July Agribusiness Loan Monitor, the last for the 2012-13 financial year, which shows that of the 0.75 percent interest rate cut provided by the RBA over the year, banks passed on between 0.40 and 0.65 percent.
“The Monitor is designed to provide greater transparency to farmers about the movement in bank interest rates in response to the RBA’s cuts, to help farmers make informed decisions about their financial lending,” Mr Fraser said.
“What the Monitor shows us for the 2012-13 financial year is that of the seven agribusiness lenders tracked for their term loans, ANZ and NAB passed on the greatest cuts to farmers – 0.65 percent each – with Suncorp close behind on 0.64 percent.
“These three banks also led the table in overdrafts, with ANZ and NAB passing on 0.65 percent each, the most out of the eight lenders tracked, and Suncorp passing on 0.63 percent.
“While we thank these banks for passing on the majority of the year’s rate cuts to their farming and agribusiness customers, we urge all financial lenders to pass on today’s rate cut, and indeed all future rate cuts, in full,” Mr Fraser said.
The release of the NFF’s July Agribusiness Loan Monitor comes amidst discussion about the level of rural debt in Australia’s farming sector, which sits at approximately $60 billion.
“At a regional forum hosted by our members, AgForce, in Roma recently, a presenter analysed figures from the Queensland Rural Adjustment Authority, which showed that over the past 18 years the debt of the average beef industry borrower in Queensland increased by more than 500 percent – with most of the growth in this debt occurring over the past six years,” Mr Fraser said.
“The figures, compiled from data by the commercial lenders, show that in 2011, the average beef industry borrower in Queensland had a debt of $1.4 million. That’s exactly why it is so critical that the banks pass on every single percentage point of the RBA’s rate cuts to their agribusiness customers – as it could mean thousands of dollars in interest rate relief for Australian farmers,” Mr Fraser said.
The NFF’s July Loan Monitor is available here. The Monitor is compiled each month by leading money market monitor Canstar and published by the NFF as a tool for all Australian farmers.