Interest rate rise stings Qld's hardest hit

The variable interest rate for the federal government’s popular Drought Assistance Concessional Loans Scheme jumped as much as 62 basis points on August 1 from 2.47 per cent to 3.09pc. The loans are administered by the Queensland Rural and Industry Development Authority (formerly QRAA) on behalf on the commonwealth.

However, even with the jump the concessional rate is still about 2pc below commercial rates available to the majority of producers. 

AgForce president Grant Maudsley said with more than two-thirds of Queensland still drought declared, many producers needed ongoing support.

“The prolonged and severe drought has taken an enormous financial, environmental and emotional toll on farming families right throughout Queensland,” Mr Maudsley said.

“While we appreciate that the interest rates for the federal government’s concessional loans are lower than commercial loan rates, any rate increase now will just add to the hardship drought-affected producers are already experiencing.

“We would urge the federal government to rethink this rate increase at this time as it flies in the face of the fundamental purpose of the concessional loans scheme, which is to help producers that have experienced significant financial impacts as a result of drought.”

A total of 346 individual farming enterprises in Queensland have been assisted with more than $250 million in commonwealth funding since July 2013.

Information received by Queensland Country Life shows the agreement struck between Queensland and the commonwealth dictates that the concessional interest rate will be reviewed and revised when there is a movement of more than 10 basis points (0.1pc) in the six month average of the commonwealth’s 10 year bond rate. 

The concessional loans are designed to help eligible farm businesses to manage, recover from, and prepare for, future droughts, and to return to viability in the long term. Loans for up to 50pc of a farm business’s final debt position to a maximum of $1 million are available.

Almost 70pc of Queensland remains drought-declared, with many regions now in the fifth year of severe rainfall deficiencies.

The interest rate rise comes as the Department of Science says Queensland has a slightly higher than normal probability of exceeding median summer rainfall. 

However, for some south-eastern parts of the state the probability of exceeding median summer rainfall is lower than normal in the November to March period, it says.

A spokesman from the Department of Agriculture said the concessional loan scheme interest rates were reviewed on a six-monthly basis and revised if necessary on February 1 and August 1 each year. 

“The August 1 revision of interest rates is the first time that interest rates have increased since the Australian Government’s concessional loans schemes began in 2013,” the spokesman said.

“The concessional interest rate for the Drought Concessional Loans Scheme, which closed for applications on October 31, 2016, is revised in accordance with material changes to the six-month average of the daily five-year Commonwealth bond rate.

“Although the interest rate has increased during the most recent review period, the revised interest rate still translates to lower loan repayments than when the Drought Concessional Loans Scheme was first available in 2014, when the initial interest rate offered was 4pc.”

The spokesman said the current 3.01pc interest rate remained substantially lower than commercially available loan products, providing significant financial relief to farm businesses across Australia.

The next interest rate review will take effect from February 1, capturing bond rate movements from May 1 to October 31, he said.