Dealing with farm debt issues will again feature in this year’s political cycle in Queensland with the Farm Business Debt Mediation Bill set for debate.
The recently released Carnell inquiry into small business loans highlights some ongoing issues with the adequacy of the law and practices governing financial lending to small businesses. Unsurprisingly for our sector, the inquiry found that there have been some very poor practices employed by some members of the banking industry when dealing with the impairment of customer loans. Of the cases submitted, the inquiry found that the banks acted reasonably a third of the time, while in another third of cases it concluded that bank conduct was unacceptable and possibly unconscionable.
These findings are damming and they are concerning for agriculture because farm businesses are capital intensive and they have limited options for alternative sources of finance.
Perhaps also unsurprisingly, one of the 15 recommendations from the inquiry was for a nationally consistent approach to farm debt mediation. The Federal Government initiated the development of a nationally consistent approach in September 2014; however, since then there has been little progress. During this time the Queensland Government has progressed its own legislation to address the stalled national approach. Ideally we should have a nationally consistent approach, as the banking sector, and increasingly farm businesses, operated across state jurisdictional lines.
With Australian farm bank debt levels increasing from around $10 billion to $60 billion over the past 25 years, the relationship between the banks and agriculture has never been more entrenched. So we must get the regulatory framework right, but we should also explore the alternative sources of capital and new farm business structures that will be required to drive the sector into future.
