Rural Debt Loads and the Banks

27 March 2014

Senator O’SULLIVAN (Queensland) (19:02): This speech will be the first in a series of speeches I intend to make over the next medium term regarding the grim forecast facing the people in the rural parts of my state. Generations of communities across the northern half of Queensland who have made contributions towards building the wealth of our nation are currently suffering every day from an aggregation of unprecedented circumstances.

Family farms are desperately seeking water and feed to tend stressed and starving stock, whilst at the same time family-owned small businesses are shutting their doors, their enterprises no longer viable. There is a sense of hopelessness and depression for many across this once-productive region. Seriously adding to their woes is the fact that there is seemingly no detailed plan to gather the information that is required to understand the depth and the breadth of their circumstances, particularly with respect to their industry’s debt profile, which in turn could assist in the formulation of pragmatic public policy.

It is my view that immediate action must be taken to understand the full extent of the problem of rural debt in Queensland, and, for that matter, under separate cover, rural debt in the rest of Australia. I am using this opportunity in the Senate chamber today—the first since my maiden speech—to call for a survey into the state of rural debt across my state of Queensland.

Accordingly, I urge the Australian Bureau of Agriculture and Resource Economics and Sciences and the QRAA to engage with the Australian banking sector to undertake this work. The Queensland government’s Rural Adjustment Authority has traditionally conducted a survey of rural debt in Queensland at two-year intervals since 2000. However, it has been confirmed to my office that QRAA did not undertake its survey in 2013, because the major banks declined to be involved in a state-specific survey—in this case, relating to Queensland. In fairness, the banks had indicated at that time that they would be prepared to consider cooperating with a national survey initiative. However, if the data to determine the debt profile of beef producers in the northern part of Australia was buried in a national survey, then I respectfully submit that its usefulness to develop policy or make decisions to assist or save stakeholder participants in northern Australia would be lost.

The Australian Bankers Association’s policy director Stephen Carroll is on the public record saying, as recently as last month, that there is no crisis in rural debt loads in this country. This organisation claims that rural businesses are in no worse shape than other businesses. Such a statement ignores the alarming trend revealed in the most recent QRAA Rural Debt Survey in 2011 and other empirical evidence published from various sources on this subject. Alarmingly, the 2011 QRAA survey results found debts are growing faster than revenue for many Queensland farmers, with beef industry borrowers who are considered as non-viable increasing from less than one per cent to 6.9 per cent of the total pool in just two years. The survey found the level of rural debt for the beef industry had increased by 17.2 per cent between the 2009 and 2011 surveys to a total of $9.18 billion. These increases occurred when there was evidence published by ABARES that gross farm incomes were declining. Some figures have been presented that show that, as a percentage of gross receipted income, the pro rata impact of debt for many producers has risen from 10 to 20 per cent—a massive increase of 100 per cent.

The equation of more debt and less revenue is simply not sustainable for our beef industry. In fact, it is not sustainable for any industry, but particularly those who had their ability to sell their goods taken away from them without notice. According to Queensland farm industry group AgForce, these current impacts have occurred as the result of the decision to suspend live exports, the condition of ongoing drought and the periodic interventions, and, for some, floods and fire. This real underlying debt position is expected to have deteriorated since 2011 whilst the potential for significant industry debt reduction in the short-term is likely to be limited. However, the issue for some is not that they do not know what the problem is; it is that they do not know what they do not know.

Given our focus on signing free trade agreements with our Asian neighbours, our ambition to collaborate a white paper policy platform to develop Northern Australia and the expansion of our live export trade means we must face up to and take action on this issue. If we are to truly capitalise on the increasing demand for food and fibre in this ‘Asian century’, we must thoroughly investigate the true economic state of our rural sector so that we can ensure there is a productive, stable and profitable agriculture and primary production industry.

Given the facts, it is simply irresponsible for the banks to dismiss the concept of a rural debt crisis and even more irresponsible for them not to test their position. Their posture on this question simply nets off some of the good work that banks are doing in the space of distressed lending. It is imperative at this time that the banks and the banks’ clients accurately see the circumstances the same, because, whether they like it or not, their fortunes are irrevocably linked.

I understand that the New South Wales government had planned to conduct its first ever rural debt survey in 2012 but also had difficulties in convincing the banks to partner with them in that initiative. I also understand that some rural lobby groups are contemplating launching their own debt survey among their members and cattle producers across North Queensland are discussing plans to raise money to fund that task. Similarly, at the Global Food Forum in Sydney yesterday, Queensland agriculture minister, John McVeigh, importantly declared that Australian farmers needed a ‘fair dinkum’ national rural debt survey. Dr McVeigh is probably the most qualified agriculture minister in the country—a minister who is overseeing the most unprecedented and prolonged drought circumstances for his producing constituency in over 100 years. When he speaks, we would all do well to listen.

Enough is enough. These people are sick and tired of hearing us talk. They are sick and tired of hearing Queen Street, Pitt Street and Collins Street tell them that they do not have a problem. Drought and poor government decisions are not just an economic disaster for our farmers; it attacks the very social fabric of our rural and regional communities and undermines the viability of almost every business in my remote and rural Queensland. Whilst there are countless people in agriculture who are on their knees because of these circumstances, there are also many producers across Northern Australia who are face down. These are proud men and women who do not want us to tell them that things are white when in reality they are black.

I say to the banks that these people want you to know that they will swap their debt problem for your debt problem. These people just want the truth, because they know that the truth will guide their government and their banks to implement policies that will guide us out of the quagmire of debt. Through me, this is their call for help.

Senate adjourned at 19:12