Rural banking inquiry: 'Let's get it underway' | EP 3
Federated Farmers’ latest Banking Survey shows a record-high number of farmers are feeling under ‘undue pressure’ from their banks, and farmer satisfaction is at a record low.
So, why are farmers feeling this way? Who’s to blame? And what can we do about it?
In this episode, we’re joined by Federated Farmers national board member Richard McIntyre and New Zealand Agri Brokers founder and director Scott Wishart.
Richard explains that rising rural interest rates combined with high inflation have put many farmers under huge financial pressure. Farmers are frustrated at the big differences between residential and rural interest rates, he says.
Richard says everyone in New Zealand is battling with high interest rates and high inflation, but whereas national inflation has risen roughly 7% over the past few years, on-farm inflation has been more like 13% to 17 %. Rural rates are roughly 1.5%, sometimes 2% more, than urban rates, he adds.
He says this is one of the main reasons Federated Farmers is calling for an independent inquiry into rural banking, to give farmers an understanding of what’s driving their interest rates and whether it’s fair and reasonable. If an inquiry finds it’s not fair and reasonable, we need to know what should change, Richard explains.
He goes on to say he’d also like to see the banks’ use of risk weightings for farmers investigated.
“Farmers are going through a really hard time at the moment but, as they begin to struggle more, their interest rates go up. It seems counterintuitive that, just when the farmers are really needing some help because they’re struggling under the burden of high interest costs, their interest costs are going up even further.”
Richard says he’s raised these issues with the Reserve Bank and rural lenders, who each accept there’s a difference in interest rates between residential and rural, but they both “quietly point the finger at the other”.
Scott Wishart, a founder and director of New Zealand Agri Brokers (NZAB), agrees there needs to be greater transparency from the rural banks.
He offers his views on why things aren’t working well, and why farmers are being charged higher interest rates.
He says farmers feel uncertain about whether interest rates are too high because there’s a lack of transparency around what’s actually driving those interest rates. In turn, that’s eroding farmers’ confidence.
But although there needs to be greater transparency from the banks, there are steps farmers can take now to improve their situation, Wishart goes on to say.
“I think there’s some responsibility here for farmers to negotiate with the banks more than they are currently.”
Scott says farmers need to be showing up to the bank with a clear strategy and budget, demonstrating they deserve a better deal.
Richard then says it’s time for the Government to make a rural banking inquiry happen. He’s been speaking with the chair of the Primary Production Select Committee, Mark Cameron, about them picking it up and running with it.
“Mark, let’s get it underway. Let’s give rural businesses and rural families some certainty about the fairness of the interest rates they’re paying and the services that they’re getting.”
Useful links:
Federated Farmers’ Banking Survey November 2023 – results
Farmers Weekly article about rural banking inquiry