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Banks pass on cuts to farmers, NFF Monitor shows

21 February 2012

The National Farmers’ Federation (NFF) has today released the February NFF Agribusiness Loan Monitor – the first for 2012 – which shows that all financial institutions in the Monitor, bar one, have reduced their agribusiness rates in the last two months.

BananaCoast Credit Union, Bendigo Bank and Suncorp have all reduced their term rates by 0.50 percent since December, while reductions from the other banks varied from 0.25 percent to 0.37 percent during this time.

The Commonwealth Bank is the only bank not to have made a reduction in agribusiness term rates in this period; however it did pass on the initial Reserve Bank of Australia (RBA) rate cut of 0.25 percent in November.

“In February, the RBA chose to leave interest rates on hold at 4.25 percent, after reductions of 0.25 percent in both November and December. What the February Agribusiness Loan Monitor shows is that the banks are slowly passing these rate cuts on to their farming and agricultural business customers,” NFF Economics Committee Chair John McKillop said.

“Some banks, like the Commonwealth Bank, ANZ, NAB and Suncorp were quick to reduce rates back in November, while others, like BankSA and BankWest are only just passing rate cuts on now – and not necessarily the full 0.50 percent,” Mr McKillop said.

“The Monitor was originally created to provide transparency for farmers as to how the banks are adjusting their agribusiness loan rates and to help them make informed decisions about their finances. A positive outcome from this is that the banks are now under pressure to ensure they pass on rate cuts to their agricultural customers, and to show that they’re doing so in timely way.

“The NFF is in partnership with financial research group Canstar to deliver the Loan Monitor, and the data for each is collected by Canstar eight business days after the RBA’s rate decision. This gives banks plenty of time to adjust their agricultural term loan and overdraft rates.

“Of course, we are now entering an unprecedented time in Australia’s banking sector. In the last month, a number of the rural lending institutions have taken the bold step of making unilateral changes to their interest rates – rather than the traditional practice of aligning interest rate changes to those made by the RBA.

“We may be entering a whole new paradigm in terms of how banks manage their rate decisions – which reinforces the need for an ongoing monitoring system like the Agribusiness Loan Monitor, to track the interest rate movements by the banks even in those months when the RBA holds rates steady,” Mr McKillop said.

The NFF Agribusiness Loan Monitor for February is available here. The NFF provides this valuable tool to all Australian farmers in partnership with Canstar. The data for the February Monitor is current as of 17 February 2012.

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