Rural debt increase not all bad, mayor says

Qld rural debt increase of 10.75pc prompts calls for more assistance

Agribusiness
The impact of drought on Queensland's Western Downs and Darling Downs contributed to an increase in the state's debt burden, according to QRIDA's latest report.

The impact of drought on Queensland's Western Downs and Darling Downs contributed to an increase in the state's debt burden, according to QRIDA's latest report.

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Queensland's rural debt has increased by 10.75 per cent in the past two years, which the opposition says is a stark reminder that the state's producers are doing it tough and need more help.

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Queensland's rural debt has increased by 10.75 per cent in the past two years, which the opposition says is a stark reminder that the state's producers are doing it tough and need more help.

However, a mayor in one of the regions carrying a large percentage of the state's debt said the QRIDA 2019 Rural Debt Survey tabled by the government in parliament last Friday didn't include the value of the asset behind the debt.

Crippling drought and a monsoonal flood were among the contributing factors for Queensland's $19.1 billion debt burden, which is up from the $17.24b in the 2017 survey.

Of the 16 industries covered in the 2019 survey, the three major rural debt holding industries were beef, grain and grain/grazing, which accounted for 68.86pc of the total debt.

By contrast, in 2017, the three largest debt holding industries were beef, cotton and sugar.

There has been no change to the three major debt holding areas - the Western Downs and Central Highlands, Southern Coastal (Curtis to Moreton), and Eastern Darling Downs - they make up 69.77pc of the total rural debt.

The three areas were described in the report as large primary production regions with a diverse range of industries. It said debt levels were proportional to the production practices undertaken.

Agriculture Minister Mark Furner said the increase in overall debt levels reflected the very challenging circumstances faced by rural businesses in the two years to the end of 2019, and QRIDA prefaced its report by saying that agricultural business in Queensland operated in a very dynamic environment in which debt levels were impacted by factors such as climate, natural disasters, markets, trading environments and varying production levels.

LNP leader Deb Frecklington said the report showed Queensland's food supply chain supported around one in seven jobs in the state but they were at risk without an economic plan.

"Now more than ever we should be backing our farmers to create a decade of secure jobs and grow the food and fibre we need to be self-sufficient and boost exports," she said.

Both the LNP and the Palaszczuk government pointed to their role in creating a Farm Debt Restructure Office to help farm businesses that were struggling financially.

Mr Furner said the Palaszczuk government had introduced the Farm Business Debt Mediation Program and the Farm Debt Restructure Office to help farm businesses that were struggling financially.

However, opposition agriculture spokesman Tony Perrett said that in 2017 during the last hung parliament, the LNP was able to support farmers by moving amendments to establish the Farm Debt Reconstruction Office and the rural debt survey.

"The LNP has a strong track record in supporting farmers and ensuring important information about the health of this vitally important sector is reported and made public," he said.

Western Downs Regional Council Mayor Paul McVeigh said that debt could be viewed in a positive way in that while some of it could be attributed to drought, a lot of it came from rural businesses buying neighbours out and expanding their operation.

"You need to compare debt to equity ratios and that doesn't come through in the survey," he said.

"We're very much an agricultural shire but we're driving the intensive sector of that.

"We hope that any decrease in the number of people operating farm businesses will be offset by secondary industries such as feedlotting and renewable energy."

Rural bank 'circuit breaker'

Warrego KAP candidate Rick Gurnett says the results of the rural debt survey show a need for a Rural Development Bank.

Warrego KAP candidate Rick Gurnett says the results of the rural debt survey show a need for a Rural Development Bank.

The rural debt figures prompted Katter's Australian Party Warrego candidate Rick Gurnett to join leader Robbie Katter in renewing calls for a Rural Development Bank to be implemented immediately.

"We need a circuit breaker in rural Queensland to bring profitability back into our industry," Mr Gurnett said. "The Brisbane ALP/LNP solution of just throwing more debt at us is crippling family farming."

Robbie Katter, who chaired the Queensland government's 2015-16 Rural Debt and Drought Taskforce that recommended any drought lasting longer than two years be declared a natural disaster, among other things, said there was "big, hard, strong, unequivocal evidence saying there's huge problems in agriculture and it's eroding the foundations of our towns in these rural areas".

A Rural Development Bank borrows money at government concessional rates, and buys the bad debt off commercial lenders at a discounted value and reconstructs the farmers' existing debt - with the benefit of the lower concessional interest rates.

"There are many businesses in rural Queensland which have large commercial prospects but need some assistance to get across the line," Mr Katter said.

"Some of those things don't match the existing lending criteria, but a development bank or reconstruction board is just the sort of tool that can make those things happen," he said.

The average debt of beef producers has increased to $1.4m but the survey showed that the rating of rural debt has remained steady since the 2017 survey, with 93.15 per cent of the total value of rural debt rated either viable (rating A) or potentially viable long-term (rating B+).

In 2017 it was 94.41 per cent.

"Australian farm businesses rely upon debt funding as a principal source of capital," the survey said. "Through the December 2017 to December 2019 period, debt funding has continued to be an important source of funds for working capital, capital infrastructure and investment for Queensland primary producers."

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