Rural debt in Canavan's sights

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.”

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.”

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”.