The euphoria at having had a finance proposal approved and the work done becomes a distant memory when the not-so-friendly rural banker turns up.
A consequence of the tighter policies has been resignations among those rural bankers because they don’t want to come down hard on their friends. The furore also owes much to bad timing, both by the banks and by local and national authorities under a Labour-led Government generating new, restrictive policies like a catherine wheel. Bad behaviour by bank bosses in Australia hasn’t helped.
The Reserve Bank started the ball rolling quite some time back, warning dairy debt is one of three big risks to New Zealand’s financial stability. It then proposed raising the capital requirements of banks and that sparked the new approach to rural lending – tighten your belts and pay down some principal. Good commodity prices point to prudent debt repayment as the country has done under successive administrations since the global financial crisis and the Christchurch earthquakes.
But the change in attitude towards NZ farming by Australian-owned banks goes deeper into trans-Tasman differences, public vilification and perceptions, even climate change controversies. There are areas of society and business requiring loan finance that don’t carry the freight of environmental degradation, repeated SAFE allegations of animal cruelty, carbon accounting and debt mediation.
Farmers looking for the pass-on from a 1% official cash rate might instead find bank margins increase, not decrease. To sleep a little easier, ask a farmer who went through the 1980s how double-digit inflation and interest rates affected them and how they fought through debt remediation and government subsidy removal. Then, as now, they relied on the support of family and friends and faith in farming and food.
Hugh Stringleman
