Progress on rural debt solution

14 Nov, 2014 03:00 AM
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Barry Hughes and Rob Atkinson.
The biggest thing to come out of yesterday’s meeting was the spirit of co-operation from the banks
Barry Hughes and Rob Atkinson.

RURAL lenders have undergone a major transformation in attitude since a high-level rural debt roundtable meeting was held in late September and are now “listening” to farmers’ concerns, says Barry Hughes of the Gulf Cattlemen's Association.

At the Canberra meeting chaired by federal Agriculture Minister Barnaby Joyce, about 40 key stakeholders, including all of the major rural lenders, agreed to three key resolutions.

The first was ascertaining more accurate and factual data on the size and scale of the rural debt problem and the second was restarting the national rural debt mediation process.

Thirdly, Minister Joyce committed to look at adjusting eligibility criteria for the government’s $700 million farm finance and drought loan packages to better target assistance.

Mr Hughes said “the wheels are turning” on the three promised follow-up items with the first face-to-face meeting held in Canberra this week, of the working group he sits on that’s assigned to harmonising a debt mediation process.

“Yesterday was all about moving forward with getting the processes in place with the farm debt mediation national protocols we’ve been assigned to do by the Minister,” he said to Fairfax Media.

“But the biggest thing to come out of yesterday’s meeting was the spirit of co-operation from the banks with regards to putting that information together, which is a major turnaround.

“It was a major turnaround in the way the banks are having this conversation and listening to our concerns.

“Six weeks ago we had denial and in my discussions we could not get a comment in regards to the scope and scale of the debt issue.

“The standard response from across the financial institutions was, ‘our agricultural portfolio is in good shape right across the spectrum’, but that clearly isn’t the case,” he said.

“From a commercial point of view I can understand the reason behind that type of response, but at the same time the banks needed to front up and deal with the issue.”

Still waiting for data

However, Mr Hughes said they’re still waiting on the banks to provide current data on the size and scale of the rural debt problem.

“It’s disappointing the banks haven’t met the deadline for having that information on the Minister’s desk but my information says it will be on the Minister’s desk either by end of this week or early next week,” he said.

“We await further instructions from the Minister in regards to how that information will be incorporated into this process of looking at debt mediation protocols.”

Mr Hughes said currently there was no open and transparent system in place for debt mediation between farmers and banks.

“It’s just a piecemeal approach that needs to be tightened up,” he said.

“We need greater clarity about the mediation related services that are available to farmers and to make it easier for farmers and lenders to be aware of their rights and obligations.

“The consistency we’re trying to build into these national set of protocols will take care of that.”

Mr Hughes said successful, long-running rules and protocols used in NSW and Victoria were now being used to model a national debt mediation process.

“The national framework will be built around the NSW model, with the Victorian model also contributing, but we also have a voluntary code in Queensland that offers some good points which we’ll also be looking at,” he said.

“We certainly want to see consistent protocols in place, early intervention, pre-mediation and a cost structure that’s not exorbitant in terms of putting more financial pressure on distressed asset owners.

“A cooling off period - once the documents have been signed – is also pivotal to the success of this whole process.

“Some significant costs are associated with the debt mediation process and so we have to get that right, especially when we’re talking about involving distressed assets in this process.”

Early intervention essential

Mr Hughes said this week's participants recognised early intervention was a key protocol for any national debt mediation to achieve successful outcomes.

He said pre-mediation was also a priority with a skilled, independent third party - like the Rural Financial Counselling Service officers – negotiating with the borrower and lender towards mutual resolutions.

“That’s yet to be put in place but is one of the options the working group is looking at,” he said.

“It’s a good option as far as I’m concerned because we’ve already got rural financial officers working in the system and because of the debt issues facing the northern beef industry those people have already been operating in familiar territory.

“I think it augers well for that type of entity to be part of the process.”

Mr Hughes said the process would now continue with more phone hook-up meetings and another face-to-face forum, with a final document due to be on Mr Joyce's desk by the middle of December.

“There are a number of issues at play here but there’s consensus in the room we can achieve something positive for everyone,” he said.

“I believe the mediation part of this process is the first stepping stone in pulling together a revamped financial management approach to our whole industry.”

After the September meeting, Mr Joyce said collecting factual data to ascertain the scale of the debt problem - from the gulf of Queensland down to northern NSW and in the live cattle area - would be handled by the Australian Bankers Association, National Farmers Federation and ABARES, with input from the Gulf Cattlemen's Association.

He also said the government would work with the ABA and rural financial counsellors to develop a standard form of national terms for the debt mediation process.

The Australian Bankers Association was contacted for comment.

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