TL;DR:
- Federated Farmers advocates for an independent inquiry into rural banking in New Zealand, highlighting concerns over high-interest rates and the need for transparency.
- The inquiry aims to provide rural businesses with certainty about the fairness of their interest rates and banking services.
Federated Farmers of New Zealand is pushing for the commencement of an independent inquiry into the state of rural banking. The organisation has expressed concerns over the uncertainty many farmers face regarding whether the interest rates they are charged are fair and reasonable.
This call for action is driven by the lack of transparency in how these rates are determined, according to Richard McIntyre, the spokesperson for Federated Farmers on domestic commerce and competition.
In the lead-up to the last General Election, Federated Farmers actively lobbied for the new government to initiate this inquiry, gaining broad support from various political parties. Discussions with Mark Cameron, the chair of the Primary Production Select Committee, have been positive, with hopes high for the inquiry’s advancement.
The need for such an inquiry has become more pressing as farmers grapple with rising interest rates amidst high inflation, significantly impacting their financial stability. The disparity between the interest rates offered to residential borrowers and those applied to farmers has been a source of frustration, with rural rates often being 1.5% to 2% higher than urban rates. This situation is exacerbated by on-farm inflation rates, which have soared to between 13% and 17% over the past few years, compared to the national inflation rate of around 7%.
McIntyre emphasised the importance of understanding the factors driving these interest rates and assessing their fairness. The inquiry would also examine the banks’ use of risk weightings for farmers, which can lead to higher interest rates as farmers face financial difficulties.
Both the Reserve Bank and rural lenders acknowledge the difference in interest rates but have pointed fingers at each other regarding the cause. This regulatory aspect, along with the banks’ policies, is a key area that the inquiry aims to address.
Scott Wishart, a director of New Zealand Agri Brokers (NZAB), echoed the need for greater transparency from rural banks. He noted that farmers’ confidence and financial control are crucial for their success, suggesting that better negotiation with banks and clear financial planning could help farmers secure more favourable interest rates.
This push for an inquiry reflects Federated Farmers’ commitment to ensuring that New Zealand’s rural sector is supported by fair and transparent banking practices. The organisation, in partnership with AgriHQ, continues to advocate for the interests of New Zealand farmers, aiming to strengthen their voice and influence.
The discussion on this topic will continue in the upcoming episode of the Federated Farmers Podcast, providing further insights into the challenges and potential solutions for rural banking in New Zealand.
