Letting young farmers use KiwiSaver to buy their first home, farm, herd or flock would help them fast-track their way through the sector, says a Waikato sharemilker.
Danielle Hovmand, 27, is keen to see National follow through on a KiwiSaver rule change policy announced on their final day of campaigning.
“Make it happen – show New Zealand that the farming sector is the place to be, that farming is sustainable for the future, and that New Zealand farmers feel valued,” Hovmand urged the new Government.
Currently, young farmers like Hovmand cannot withdraw their KiwiSaver for a deposit to get on the ownership ladder.
Federated Farmers has been calling for a change to this rule as one of its 12 key priorities for the next Government.
Hovmand, Federated Farmers’ sharemilker vice chair for the Waikato, says it’s high time young farmers had the same opportunity as their urban counterparts, and she was pleased to hear National announce it would allow this if elected.
“As a dairy farmer, you usually get a house on-farm. It’s a disadvantage because, when you use your KiwiSaver to buy your first home, you are legally obliged to live in it. So, if you’ve already got a house on-farm, you can probably only afford a house in town (as your first home), not rurally, so are you going to move into this house and then travel half an hour to work?”
Hovmand, who won the New Zealand Dairy Industry Awards Auckland-Hauraki Share Farmer of the Year 2022, says giving young farmers access to KiwiSaver would help them achieve their business and career goals faster.
“In the dairy industry, we have the most amazing progression pathway. It’s very clear: you start as a farm assistant, work your way up to 2IC/farm manager, and then you can go off on your own into contract milking/sharemilking. It’s very well laid out and we have a huge amount of resources to make this flow really nicely with whoever you’re working for.
“I think the KiwiSaver announcement ties in really nicely with that progression pathway and adds another stepping stone, because you’re working your way on wages, you’re accumulating money in KiwiSaver. You then might go out on your own as a contract milker and, if you can, add the minimum amount and still be gaining money on it.
“And it then fast-tracks that need to stay contract milking for such a long time to be able to build equity. You can get yourself there a lot quicker with being able to use all that money you’ve worked really hard for.”
Hovmand and her partner Harry Phipps, who’s a builder, went in together this season to buy their 250 crossbred cows (“they’re a bit of everything”), which they’re milking on a 78-hectare farm owned by Jim and Judy Barrett just outside Morrinsville.
“We missed the boat a bit because we’ve already bought our first herd. If we had been able to use our KiwiSaver, we would have been in a stronger financial position and be able to service debt faster. We’re paying upwards of 8% interest, so we’d be paying thousands less right now if our initial equity was higher.”
That would have been a big help in today’s tough financial environment, she says.
“Again, it’s that whole progression thing – the quicker you can pay off the cows, the quicker you can move on into looking at farm ownership.”
For single people or those wanting to buy on their own, tapping into KiwiSaver would be “really awesome”, she says.
“You need close on 50% equity to be able to purchase your first herd. We were only able to buy the cows because we went in together and that gave us enough equity. If I was single and wanting to buy the cows myself, I’d have had to contract milk for another season to get there.”
Hovmand says she “absolutely” sees herself using KiwiSaver – which she’s been paying into for 11 years – as way to achieve farm ownership one day.
“It’s a great motivator to keep putting money in there.”
National’s Agriculture Spokesman Todd McClay, on the eve of the election, told farmers in Morrinsville that a National-led Government would let young farmers use their KiwiSaver as part of a deposit to buy a farm, or sharemilking herd or for a flock, to help them get on the ownership ladder.
He said people in towns could use KiwiSaver for their first home deposit but, in rural New Zealand, this wasn’t possible.
“This just seems wrong, and the next National Government will fix it,” McClay said.
Fixing it is something Hovmand’s now keenly awaiting, if not for herself than for many of her young farming friends working hard to take that next step.
Her final message to the new Government: “Recognise the value of the industry and how important it is to ensure there is adequate succession, so we can continue to be some of the most efficient food producers in the world.”
In Focus: The myth of the urban-rural divide
Bryan catches up with a young Federated Farmers member, Danielle Hovmand, who thinks young farmers should be able to use their KiwiSaver funds to invest in land or livestock (listen from the 19:30 minute mark).
He also has an in depth chat with two Massey University researchers who have done a survey on how people view farming in New Zealand.