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Hedging our bets: farmers welcome interest rate cuts

1 November 2011

The National Farmers’ Federation (NFF) has welcomed today’s announcement by the Reserve Bank of Australia (RBA) that interest rates will be cut by 25 basis points.

NFF President Jock Laurie said the reduction in interest rates, the first reduction since April 2009, was very welcome news for the agricultural sector.

“What we’re currently seeing is a very positive outlook for farmers and for agriculture. While there are still challenging seasonal conditions facing some parts of the sector, in many ways, the current conditions for most are very positive,” Mr Laurie said.

“Australian farmers are heavily exposed to interest rate movements, more so than many other sectors due to our large levels of farm debt after a decade of drought and, more recently, natural disasters. Today’s interest rate cut to 4.5 per cent means farmers will be better placed to meet their financial obligations.

“It is also good news for farmers as it means less pressure on the Australian dollar, which is currently sitting at 105 US cents after reaching highs of 110 US cents earlier this year.

“We know that every one per cent appreciation in the Australian dollar pushes our farm income down by around $220 million in raw terms due to our high reliance on our export markets, so a weakening Australian dollar and an interest rate cut combined spell good news for the sector.

“Of course, what we now await with interest is the reaction of the banks to this rate cut.

“The NFF Agribusiness Loan Monitor was introduced in June this year to monitor the movements in agribusiness rates against the RBA official interest rates and to provide a tool for farmers to compare the loans available from the different financial institutions.

“As rates have been on hold since the introduction of the Monitor, this month will be the first time we are able to check if financial institutions reduce their loan rates in response to the official rate. We look forward to seeing the response from the banks and providing this information to farmers,” Mr Laurie said.

The NFF November Agribusiness Loan Monitor is scheduled for release on Monday 21 November.

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