Rural debt in Canavan's sights

18 Aug, 2014 04:00 AM
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Senator Matthew Canavan.
Put a chart of rural land values next to US house prices, you would struggle to tell the difference
Senator Matthew Canavan.

QUEENSLAND LNP Senator Matthew Canavan has called for a federal parliamentary inquiry into rural debt, which he says is an urgent issue being "ignored" by his urban colleagues.

On a recent tour of north-west Queensland Senator Canavan drove from Townsville to Mount Isa to investigate pertinent issues for locals.

He said the four-day trip unveiled widespread support for the proposed inquiry, which would investigate the scope of rural debt and seek practical answers.

Senator Canavan said the rural debt issues faced by Queensland over the past few years were similar to the US sub-prime mortgage crisis which sparked the US recession in 2007 following a dramatic slump in property values and excessive bank lending.

“If you put a chart of rural land values next to US house prices you would struggle to tell the difference,” he said.

"But because this has happened far from the city, it is getting ignored.”

Senator Canavan wants the Senate inquiry to examine the rural sector’s capacity to service and repay debt and what can be done to help alleviate it.

He said his office has already prepared draft terms of reference for such an inquiry, for which he gathered feedback on during this month's tour, and he believed rural debt should be a high-priority issue for the Coalition government to address.

“This is an area where my Queensland colleague Senator Barry O’Sullivan has already led the way and done great work in raising awareness,” he said.

“We need to make sure that our fellow MPs, as well as the general public, understand what a critical issue this is in the bush and at the same time talk to landholders about their views on how the problem should be tackled.”

Support sought from Leyonhjelm

NSW Liberal Democratic Party Senator David Leyonhjelm offered lukewarm support for the rural debt inquiry.

“I’d probably support an inquiry but I would be very wary about the government providing any solutions at the end of it,” he said.

“And if the proposals cost taxpayers any money then I’d be opposed to it.”

Senator David Leyonhjelm said many individual farmers may have uncomfortably high debt but the key question was: “What do you do about it?”

“The typical answer is let the government help those farmers out but nobody forced them to take on that debt,” he said.

“They did not get into trouble because of anything the government did, except for the live export guys who I have more sympathy for.

“I’m sympathetic to farmers who are in financial difficulty but it’s not sufficient to say taxpayers should bail them out.

“The reality is, if they have to sell their farms because of excessive debt, those farms will stay there and the new owners will use them again for primary production," he said.

“It’s like a fish shop going broke - a new owner will come and buy that business and it will still be a fish shop.

“Farms don’t go anywhere when they’re sold; they’re still here.”

Bob Katter MP rural debt groundwork

Last week, federal independent MP Bob Katter reiterated the Reserve Bank Amendment (Australian Reconstruction and Development Board) Bill 2013 he introduced into parliament to tackle farm debt.

He said the Australian Reconstruction and Development Board (ARDB) could help ensure the sustainability of Australian agriculture by taking over eligible bad debt from commercial banks at discounted value and offering farmers refinancing at interest rates lower than commercial lenders.

“The plight of our farmers is very real,” Mr Katter said.

“Rural debt has increased by 17 per cent since a rural debt survey was conducted in 2009.”

According to Mr Katter, the government’s current concessional loans scheme was an ineffective solution to the farm debt crisis.

He said the Queensland Department of Agriculture’s figures showed 214 applications had been received, 200 assessed and only 80 approved.

“Out of the $320 million drought package issued by the LNP Government and the $420m issued by the ALP Government, only $39.669 million has been granted."

Mr Katter said the ARDB was like a bank that borrowed money, loaned it to farmers then take a write-down of the at-risk debt and negotiate with the ARDB about what level of debt they will take on.

Senator Leyonhjelm said he hadn’t seen details of the proposed ARDB and accompanying legislation “but knowing Bob Katter’s approach I can guess what it would involve”.

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Colin Bettles

Colin Bettles

is the national political writer for Fairfax Agricultural Media
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READER COMMENTS

Qlander
18/08/2014 8:23:46 AM

The market has to correct back in line with the earning capacity of these businesses. Unfortunately that is going to mean a lot of pain for a lot of people. My main concern is that the banks receive their share of the pain, so they learn a lesson about unrestrained lending. Ultimately all the money from Government bailouts ends up in the banks coffers, and they feel little or no pain.
Gecko
18/08/2014 8:43:21 AM

Thanks Senator Canavan. But. You were one of the unknowledged before you did your trip. Do it more often, but on your next trips take another Sentator along with you. But they wont accept your invitation. They wouldn't survive the rough roads and lack of services, especially telecommunications. Sentator Leyonhjelm has chsoen his words carefully. But as witnessed by what he has already said (and not said), rural Australia wont get much support from him. History will record that this Senator to be the worst person to provide support to the Australian farmers!
Makka
18/08/2014 9:15:31 AM

How do you calculate earning capacity when a Govt can instantly pull the plug on a market, and virtually overnight your earning capacity is at least halved ?
dunart
18/08/2014 9:34:40 AM

Ok, then when are we going to have free trade on the domestic market , hence our suppliers? this is why we have debt, not because we "over borrowed" If “leyonhjelm” is true to his word, he will stop tax payers money flowing to support the domestic labour market and domestic business. He will also should be strongly focused on getting farmers cost to “world market costs”. At the moment they are several times that , so we are borrowing money to fund the “wealth transfer”, Someone tell me it’s not a wealth transfer when the gap between world market price and domestic cost of product
Qlander
18/08/2014 10:16:20 AM

Makka: Property prices were well out of line with earning capacity, before the livex cockup. At the moment cattle properties have no earning capacity at all (only loss capacity).
R
18/08/2014 11:02:02 AM

Spot on Makka. The destruction of the northern beef market by Canberra morons, is the major reason that people have been so badly affected by this drought. Worst of all is that the people we replaced them with, are doing as little as possible to assist.
pepper
18/08/2014 11:15:00 AM

Even without debt the net returns on primary production in this country need scrutiny. How is it possible that secondary industry ( that feed off primary) are reporting record profits and a debt clear primary enterprise feeding that profit is going under ( returns lower than working costs ). This is nothing less than transfer of capital from price takers to the corporate communists. Feudalism at best. Why are people scared of an open and transparent market ....which may facilitate a farm gate price to sustain primary production in this country. Lets start with a No.1 pool for domestic product
angry australian
18/08/2014 12:23:51 PM

Government can't mandate profit or margin, but government can influence profitability which impacts on debt. Talk to any primary producer, farmer,forester or fisher and ask what the biggest impact on profitability in the last 25 years and the answer is always government costs. Whether it be inspection fees.Audit trails, workcover, super,R&D, water levies or any of the other myriad of charges like ASIC levies that have eaten away at profit until the system is imploding on the producer. We don't run cost plus businesses, and there is no more fat on which to survive so we take on more debt
angry australian
18/08/2014 12:29:24 PM

.... It's no use blaming banks. Sen.Canavan has to look at how much pre tax money our governments are ripping out of our businesses. Until these businesses get back to a reasonable long term P/E ratio they will always struggle to pay debt, while they are at the whim of nature
Rob Moore
18/08/2014 12:52:35 PM

dunart! Answer - When the PPP is in place. Nothing else will make the slightest difference for the better!
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