Now Westpac delivers FMD help and cheap `carry on’ funds

Westpac opts for FMD offset deals and drought cash flow loans

Westpac national agribusiness manager, Stephen Hannan.

Westpac national agribusiness manager, Stephen Hannan.


Westpac bows to pressure on FMD interest offset deals and extends drought loan options


Westpac is banking on its farm sector customers needing cash flow help for at least a year after good seasonal conditions return.

The bank has just set aside $100 million to provide discounted carry on finance at 3.58 per cent interest for farmers and farm sector businesses as part of a revised drought assistance package.

Up to $1m each in loan funds will be available to customers in drought affected areas to cover current household or business costs ranging from fuel to school fees, or to ensure farmers and farm-related businesses have money available to restock or buy inputs when the big dry breaks and normal farming activities can resume.

Westpac Banking Corporation has also become the latest rural lender to bow to political and public commentary about interest rate offset options for borrowers with farm management deposits (FMD).

We know it will take more than a year to work through, even if good rain does fall and things start to green up - Stephen Hannan, Westpac

The bank has followed the past week’s commitments from Commonwealth Bank of Australia and Rabobank, offering a similar interest rate adjustment for certain farm borrowers with FMDs.

They will effectively be able to offset their term FMD savings interest to ensure cheaper loan costs.

Rural Bank has offered FMD offsets for 12 months and National Australia Bank followed with its own version last month. 

Drought-impacted Westpac customers now also have the option to defer principal and interest repayments on existing business term loans and equipment finance for up to a year.

“With the drought taking hold tighter each week in many areas of Australia and the frosty winter sapping soil moisture levels even further, customers will need some cash flow help over the next few years,” said Westpac’s national agribusiness manager.  

“We know income is tight for a lot of customers at the moment and we know it will take more than a year for many to work through, even if good rain does fall and things start to green up during summer.”

Mr Hannan said carry on finance loans would provide an alternative to cash flow earnings for up to three years.

Funds for bills, restocking

“The money can be used to pay rates, power, fuel or stockfeed bills, or cover fertiliser or replacement livestock costs when the season recovers and you can plant a crop or rebuild the herd or flock,” he said.

Farm services businesses from harvest contractors and carriers to merchandise retailers and agronomists would have the same access to finance as primary producers.

The discounted borrowing rate tied to the carry on loans is almost 3pc below the bank’s standard business loan interest fee.

Confidence in the ag sector’s positive overall financial health had encouraged Westpac to offer discounted carry on finance and freeze repayment costs on existing loans in drought areas.

“Despite the drought, prices for livestock, wool, cotton and horticulture are still above average, and commodity market prospects generally look favourable into the future,” Mr Hannan said.


In fact, Westpac’s agribusiness team has even expanded about 15pc this year, reflecting its bullish longer term thinking on farm sector business prospects.

“In most cases farmers have lately been able to build significant equity in their businesses, so it’s not a bad time to consider taking on more debt if you need to,” he said.

Confidence in ag

“We’re looking to give them confidence and certainty so they can focus on more critical issues like keeping their businesses running and looking after their loved ones.”

However, any extra lending arrangements still require plenty of due diligence first.

“We’re not encouraging customers to create risks for their businesses.”  

Interest adjustments for borrowers with FMD accounts will only apply to those individuals or partnerships with eligible loan and FMD accounts in the same names, and if they accepted the bank’s offer.

Interest will be calculated for the current financial year based on the relative balances of the FMD and the business loan.  

Mr Hannan acknowledged that of all the challenges farmers faced, drought was one of the most difficult.

“We have a deep commitment to supporting rural and regional Australia and know times like these can be extremely tough,” he said.

“Taking into consideration the widespread impact of the drought, this is the first time in Westpac’s 200 year history we have set aside such an amount to provide immediate and long-term financial relief to our agribusiness customers.”

The drought assistance package complements Westpac’s recent combined $200,000 donation to the Salvation Army Rural Support Services Program, and its Community Recovery Resilience grants.

The bank is also proactively contacting drought-affected customers and encouraging those experiencing financial difficulties to contact their relationship manager for a confidential review to understand the financial options available.

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