Hard-up farmer $6000 handout
Distressed farmers can now receive a free grant of $6000 for independent financial advice to help them out of difficulty.
The handout is half taxpayer funded, while the remainder comes from whichever bank the farmer is with, and has been met with criticism from the Taxpayers’ Union executive director, Jordan Williams.
‘‘It is tragic that a lot of farmers are struggling, but with events in China, so too are a lot of small business owners across the economy. It seems quite unfair that taxpayers are forced to stump up to help farmers, just because they are a group favoured by the political lobby.
‘‘I take my hat off to the community efforts here, but it sets a bad precedent in terms of taxpayer funding,’’ Williams said.
The one-off fund is worth a potential $400,000, with $200,000 coming from the Government and channelled through Rural Support Trusts. The trusts will provide up to $3000 to a farmer, while the farmer’s bank will match that amount dollar for dollar.
The fund is the second support mechanism offered to farmers in recent months. The Farm Debt Mediation Act is intended to help farmers faced with a farm closure by enforcing a mediation process with banks.
The estimated cost to set up the scheme is $350,000, and the estimated annual cost $250,000 to $300,000. It is expected each case of mediation will cost about $6000, which will be split between the lender and the farmer.
Bankers’ Association chief executive Roger Beaumont defended the latest funding agreement, saying it was a reflection of the challenges farming was facing.
‘‘The initiative offers a fresh set of eyes for a farmer who works intensively seven days a week in their business and sometimes gets too close to it.
‘‘It’s not a concern about any significant uplift in farmers in distress. No bank wants to see any business fail. To put it into perspective, there are about 52,000 farms and there are fewer than 10 mortgagee sales a year.’’
Even so, the Reserve Bank continues to warn about dairy debt in particular. Altogether agriculture debt is $63.1 billion, with dairy at $41.5b. Five years ago dairy farmers owed the banks $34b.
‘‘When agriculture thrives, New Zealand thrives,’’ Federated Farmers policy manager Nick Clark said, quoting the fact $59.4b merchandise exports come from the dairy, meat and wool, horticultural and arable sectors.
He listed the challenges farmers face to justify the support, including freshwater management, biodiversity and climate change policy changes, and biosecurity threats.
‘‘Farms are not typical businesses.
They are price takers, at the mercy of commodity prices, exchange rates and the weather. Their cash flows can be highly seasonal and in-flows do not always match out-flows, meaning that seasonal financing and overdrafts can be necessary. Most farms are by most measures small businesses (and often family owned and operated), but many have asset and debt levels of large, sophisticated corporates,’’ Clark said.
Banks had encouraged farmers to increase production and take on debt to do so, but were now hit by the Reserve Bank’s bank capital requirements and had changed their own risk tolerances. As a result they were tightening lending.
Rural Support Trusts national council chairman Neil Bateup said the fund would help identify solutions. Consultants will provide a report, which will be given to the farmer and their bank.
Instead of paying for consultants, the best way the Government could help farmers would be to reduce regulatory taxes, high corporate tax rates, and ever increasing environmental red tape, Williams said.
Banks involved in the funding agreement are ASB, ANZ, BNZ, Heartland Bank, Rabobank, SBS Bank, TSB and Westpac.