December 5, 2012
NSW Farmers’ Association today called on Australian banks to pass on the reduction in their funding costs to the rural sector. The call by the association follows the announcement by the Reserve Bank of Australia to drop the cash rate by 25 basis points to 3 percent. NSW Farmers’ President Fiona Simson said rural lenders are still charging 1 percent more for loans to farmers compared with rates charged to mortgage holders. Ms Simson said farmers were already feeling the pinch with the higher Australian dollar which was reducing their income. “We also feel at a disadvantage because farmers are faced with higher lending rates than the competitive metropolitan mortgage rates – for no reason other than the fact that we are in farming,” she said. “This should not be the case. We are some of the most productive farmers in the world and yet we cannot get access to the same rates as other borrowers in Australia. “We urge Australian banks to show some equity and give farmers an early Christmas present by passing on the cut to their funding costs to the rural sector.” National Farmers’ Federation Canstar report released in November 2012 shows agri-term loans generally tracking 1 percent higher than standard variable mortgages. It also reveals rural lenders are generally slow to pass on rate reductions and when they do, they are not passed on in full. Meanwhile, the reduction in the cash rate today would help the farming sector by reducing the pressure on the exchange rate that continues to remain at above parity rates. Ms Simson said reducing the exchange rate makes farmers’ products more competitive on the world market and in turn improves returns to farmers.