Tuesday, 30 January 2024 11:55

Will Aussie banks come to the aid of our farmers?

Written by  Peter Burke
In any downturn, banks will always be very supportive of farmers through the first year, but come the second year, things may start to change. In any downturn, banks will always be very supportive of farmers through the first year, but come the second year, things may start to change.

Farmers are at the mercy of Australian banks as they navigate through low prices and high input costs, says accountant Pita Alexander.

He points out that the first thing to remember when talking about banks is that Australian banks control about 85% of New Zealand's total bank lending.

"In other words, we are at the mercy of the people on the 36th floor of a building in Melbourne," he told Rural News.

In any downturn, Alexander says the banks will always be very supportive of farmers through the first year, but he says come the second year, things may start to change.

He says a lot will depend on the existing financial circumstances of individual farmers or horticulturists. In some cases, he says banks will help those who have been to hell and back, but others may not be so lucky.

He points out that banks' first priority is always their shareholders. He says there has been some criticism about what is seen as the huge profits that banks are making but he argues that the country needs strong, profitable banks.

"The last time I looked at the ANZ accounts in 2022, they were making about 11% on shareholders' funds which wasn't out of line," he says.

The other issue hanging over NZ, says Alexander, is the tax take from the agri sector.

He says Treasury has over estimated this over the last two years and this may have implications for government spending.

A Few Tips

  • The downcycle is no time to be making bank loan principal payments.
  • It's not a time to be helping family financially.
  • Sell anything that is surplus.
  • Look carefully at development that involves capital cash.
  • A couple must stay on the same page in a downturn.
  • There is no substitute for access to a top class farm advisor.
  • Government will talk comforting words to you, but they will be of little use to you.

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