Federated Farmers are claiming a major advocacy win on Parliament’s announcement that it is kicking off an investigation into rural banking.
“Having the primary production select committee initiate a briefing to take a closer look at rural banking issues is a really positive first step forward,” Federated Farmers board member Richard McIntyre says.
“Federated Farmers have been calling for an independent inquiry into rural banking since September last year, so it’s good to see the politicians have sat up and taken notice.”
McIntyre says farming families have been asking fair questions about rural banking and interest rates, and it’s about time they got some straight answers.
“It’s still very early days, and we’re yet to see the terms of reference, but Federated Farmers will definitely be engaging in this process on behalf of our members.”
Mark Cameron, the committee’s chair, says they’ve heard from many farmers and those living in rural communities about the disparity between rural and urban bank lending practices.
“Based on this widespread feedback from constituents and sector groups, the primary production committee has determined this topic as one worthy of further scrutiny.
“We hope to thoroughly investigate this issue and hear the experiences of those affected,” Cameron says.
Briefings are a type of inquiry a committee can undertake to give Members of Parliament the chance to inform themselves about topics of interest or concern.
They can be a one-off information session, or substantial consideration of a matter over a longer period, before deciding whether to initiate a more formal inquiry.
“I’m hopeful that when they get their heads under the hood and start looking around, they will be able to see where things aren’t operating as well as they could be, and get to work sorting it out,” McIntyre says.
Federated Farmers’ latest Banking Survey, carried out last November, showed farmers’ satisfaction with their bank was at its lowest point since the survey began in May 2015.
Of the farmers surveyed, a record-high 25.8% felt they’d come under ‘undue pressure’ from their bank over the previous six months.
The survey found 44.3% of farmers felt their mental wellbeing had been affected by their debt levels, interest rates, changing conditions, or other forms of pressure.
Concerns about debt, interest rates and banks have also consistently topped the list of issues driving low farmer confidence in Federated Farmers’ Farmer Confidence survey.
“Those survey results are incredibly concerning and paint a grim picture of how rural communities are feeling about their banking relationships at the moment,” McIntyre says.
“There are a lot of farming families across the country who are under huge financial pressure this season from rising costs and falling incomes – my own family included.
“For many of those businesses, interest charges will be their single biggest expense. That’s why it’s so important for them to have confidence they’re getting a fair deal from the banking system.”
The Commerce Commission recently carried out a market study into personal banking services, looking at the levels of competition and how things might be improved.
Its draft report, released March 21, found the sector lacked strong and sustained competition that could drive change and deliver benefits to consumers.
“It was disappointing that rural business banking was excluded from that study because I think they’d have found farmers face similar challenges,” McIntyre says.
“We have the exact same issues with limited competition, a lack of transparency as to how interest rates are set, and difficulty accessing banking services.
“Farmers have really struggled with the widespread closure of local banking branches in rural communities. Online banking isn’t always suitable when you’ve got poor rural connectivity.”
He says Federated Farmers are strongly of the view that rural communities deserve the same assurances that their banking systems are operating in a fair and efficient way.
“Any inquiry into rural banking needs to take a close look at why interest rate margins have shifted significantly more for rural lending than for residential in recent years.
“Regulation like the Reserve Bank capital holding and risk weighting requirements have a huge impact on the interest rates farmers pay.
“I think some serious consideration needs to be given to whether we’ve got that balance right.”
McIntyre says he’s also particularly keen for the committee look at how farmers are treated by banks when their businesses become distressed.
“Farmers need to have confidence that when they find themselves in hard times, whether through drought or a bad season, their bank will work with them to get back on track.”
Federated Farmers, New Zealand’s leading independent rural advocacy organisation, has established a news and insights partnership with AgriHQ, the country’s leading rural publisher, to give the farmers of New Zealand a more informed, united and stronger voice. Feds news and commentary appears each week in its own section of the Farmers Weekly print edition and online.
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