Federation highlights the importance of listening to farmers
Waikato Federated Farmers is urging for an independent inquiry into rural banking practices, seeking support from local MPs to address the issue. According to Federated Farmers spokesperson Garry Reymer (pictured), the financial well-being of farming families and the stability of the local economy hinge on bank lending decisions and interest rates.
“It’s too important an issue not to investigate to make sure bank tactics and profit-making in the rural sector are reasonable and fair,” Reymer said. Currently, a select committee is deliberating on the necessity of such an inquiry.
Reymer emphasized the bipartisan nature of the issue, noting, “Legitimate questions are being asked by farmers and they deserve answers. This should be a non-partisan issue that politicians from across the spectrum can get in behind and support.”
Elevated costs pressuring farmers
Farmers in Waikato are feeling the financial strain, with rising costs across various sectors and increased interest rates adding pressure. Reymer highlighted these concerns, pointing out the significant impact on local farming businesses.
At a recent Waikato University Economic Forum, Reymer and other agricultural leaders discussed the challenges surrounding investment confidence, costs, and access to capital. Reymer underscored the broader implications, stating, “There is a bigger picture but there are definite flow-on effects to agriculture.”
An independent inquiry would also examine the Reserve Bank’s capital holding requirements for trading banks. These regulations, designed to protect against a one-in-200-year financial shock, demand higher capital reserves than most countries, which banks claim necessitates an additional 0.5-1.2 percent on interest rates.
Reymer explained the financial burden on farmers: “With agricultural loans totaling $62 million, that’s an additional $310m-$720m in interest costs coming out of farmers’ pockets.”
Banks “blaming each other” amid challenging landscape
Reymer criticized the blame game between the Reserve Bank and trading banks over high-profit margins, calling for an inquiry to “cut through all of the nonsense and get to the bottom of these issues.”
The urgency of the situation is underscored by the Federated Farmers’ May 2024 Banking Survey. The survey revealed a significant decline in farmer satisfaction with their banking relationships, plummeting from 80% five years ago to just 51% today. Additionally, a record number of farmers reported feeling undue pressure from their banks, and only one in five felt adequately supported during this period of high interest rates.
