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Peak body welcomes NAB's offset offering, urges others to follow suit

24 July 2018

The farm sector’s peak body has welcomed the National Australia Bank’s (NAB) decision to allow farmers to use farm management deposit (FMD) funds as an offset against agricultural lending.

The National Farmers’ Federation (NFF) also acknowledged the lender’s decision to stop charging farmers penalty interest rates for missed loan repayments.

Speaking from the NSW Farmers Conference in Sydney today, NFF Chief Executive Tony Mahar said NAB joined Rural Bank as the only rural lenders to provide the FMD offset feature.

“The NFF has been steadfast in our call for all banks to allow farmers to use money in FMDs as an offset against loans.

Mr Mahar said he acknowledged the complexities outlined by NAB in offering the offsets, when compared with ordinary mortgage holders, and welcomed the ‘work around’ the bank had put in place. Instead of a reduction in interest due on the principle amount owed by the amount that is in the offset account, NAB will provide an interest rate discount to farmers, averaging 50 basis points.

Mr Mahar said both NAB and Rural Bank had proved that it could be done.

“The onus now clearly rests with all other rural lenders to follow suit. FMD offsets have the potential to ease the financial burden of drought, which is bearing down on many farming families right now."

Mr Mahar said NAB's decision to cease imposing penalty interest rates on farmers, was overdue, but welcome.

“The practice of imposing, what can only be described as ‘punitive’ interest, on farmers who miss repayments is not only cruel but pointless.

"If a farmer doesn't have the funds available to meet the repayment obligations in the first place, they won’t have the cash to pay additional interest.

“The measure only serves to increase the already significant pressure felt by farmers struggling to make ends meet during times of drought and other hardship."

Mr Mahar said he believed many rural lenders had recognised the need to change how they interact with their farming clients, taking into the account the complexities of a farm business and the human aspect to farm ownership.

“We know some banks had already made significant changes to their practices before the Royal Commission. We’re now seeing, following what were, in some cases, ‘shocking’ revelations, further improvements."

Mr Mahar said the NFF had a vision for agriculture to grow from a $63 billion industry in 2016-2017 to $100 billion in farm gate output by 2030.

"A healthy bank-farmer relationship is a key ingredient to achieving such growth. It is our hope that we can work closely with all banks with a stake in rural Australia, to ensure $100 billion is realised."

In the short-term Mr Mahar said the NFF would continue to talk with the banks that were yet to offer an FMD offset feature.

"We'll be asking lenders to show cause as to why they are not providing farmers with the financial products that allow them to better manage their financial burden at time when they need it most.

"Most importantly, we're urging all banks to provide flexibility, during what is an incredibly trying time for many farming families."

Media Enquiries: Ms Laureta Wallace
P 0408 448 250
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