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Rates hit historic low, yet banks continue current trend
19 October 2012
Two weeks after the Reserve Bank of Australia (RBA) cut interest rates to their lowest level in three years, only a handful of finance lenders have passed the cuts on to their agribusiness customers.
The official cash rate now sits at 3.25 percent for the first time since October 2009, following the RBA’s 25 basis points cut earlier this month, yet the latest National Farmers’ Federation (NFF) Agricultural Loan Monitor - released today - shows only five banks have passed on a cut.
According to the Monitor, ANZ Agribusiness, BankSA Agribusiness, NAB Agribusiness and Westpac Agribusiness have reduced rates by between 0.07 and 0.20 percent for their agricultural term loans and overdrafts, while Commonwealth Bank Agribusiness has reduced the rate of a residential secured agricultural loan that is not regularly gauged by the Monitor.
Today’s news comes during a period of otherwise positive financial speculation for the agricultural sector, with recent reports that key agricultural commodities are forecast to reach record highs next year.
“Agricultural analysts are predicting high prices for grains and other commodities in short supply, plus a fall in the Australian dollar linked to a predicted weakening of the minerals sector - providing a boost to Australia’s export-reliant farming sector,” Chair of the NFF Economics Committee, John McKillop, said.
“Over the past two weeks, we have seen quite a bit of discussion around the benefit of investing in Australian agriculture, and the positive gains the sector is expected to make over the next 20 years.
“What we’re seeing is investors talking about the long-term potential for farming, yet banks taking a short-term view and failing to pass on the benefit of the current interest rate cuts to our farmers.
“We’re now experiencing the lowest official cash rate in Australia that we’ve seen for three years – and while the banks have traditionally used international rates as an excuse for not dropping local rates, this argument will no longer hold up, with overseas rates like the LIBOR also falling over the last three months.
“At a time when analysis from the Australian Farm Institute and the OECD shows that Australia agriculture receives the lowest amount of total government support for agriculture of any developed nation on earth, it is essential that our farmers are receiving financial benefits in other ways – like through banks passing on the full interest rate cuts,” Mr McKillop said.
The Agribusiness Loan Monitor is compiled each month by leading money market monitor Canstar and published by the NFF. Data in the October Monitor is current as of 18 October. The Monitor is available via the Publications page of this website, along with all previous editions.
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