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Wednesday, 9 October 1985
Page: 925


Senator VIGOR(5.16) —I move:

That the Senate take note of the paper.

The Primary Industry Bank of Australia was established primarily to increase the `availability of loan funds for purposes relating to primary production, being purposes that are commercially sound, to persons who are, or have a reasonable prospect of, successfully carrying on the business of primary production'. The Primary Industry Bank of Australia has perceived that a major requirement of primary producers in borrowing is for long term loans with variable repayment terms which take account of the fluctuations in income which are due to seasonal and market influences. It is on these terms that the PIBA has entered the market-place. It was established by the Government, also on the favourable basis of a secondary lender. It deals through prime lender banks and rural finance houses which take full responsibility for credit assessment and risk, and for repayment of both principal and interest. Thus the PIBA has only 14 borrowers, which considerably simplifies its loan administration and leaves its resources free to concentrate on developing an efficient and competitive funding base. It is also supported by the Commonwealth through funds lent to it at concessional interest rates. This is to enable it to make loans available to primary producer end-borrowers on somewhat more favourable terms than may otherwise be possible.

This year the amount of these deposits by the Commonwealth decreased from $58.7m to $44.8m-that is, a 30 per cent decrease over last year. These deposits now represent only 6 per cent of total rural lendings by the Primary Industry Bank. These lendings are of the order of $729.8m. Last year they represented 8.5 per cent of total rural lendings, which amounted to $694.3m. Yet over the last year new rural lendings have declined from $127.2m last year to $35.5m this year-that is, a decrease of 72 per cent in new lendings.

The Chairman of the Bank comments in the report that this decline is due to uncertain economic conditions and depressed commodity prices. Surely one of the prime purposes of the Primary Industry Bank of Australia is to provide finance to rural borrowers to ease the burden of these external variables beyond their control. In fact, the Primary Industry Bank fails to fulfil its obligations to primary producers to provide loans on more favourable terms. In many cases, rual producers have been able to refinance their PIBA borrowings through finance companies at more favourable rates. The PIBA charges top dollar interest rates, presumably because the PIBA charges a margin on top of the prime lending rate which allows it to cover its costs.

If one were to ask dairy farmers, or dairy farmer organisations, what they think of the Primary Industry Bank the answer would be: `Shocking'. Dairy farmers, misled by the name `Primary Industry Bank' and by other prime lending banks, expected that they would receive concessional loans in this period of downturn in the industry. Instead they were shocked to find debt reconstruction is cheaper through finance companies. They are most disillusioned.

Why should Commonwealth funds be withdrawn from the bank at this difficult period? Once again it appears that farmers are financing the growing costs of government. It is short sighted of the Government to withdraw its loan funds from the major exporting sector of the economy at a time when rural exporters are beset by international markets which are depressed as a result of dumping of subsidised products from other countries and at a time when other countries are supporting their primary export industry by subsidies and dumping at any price to earn valuable foreign exchange.

The Primary Industry Bank of Australia has been highly successful both in its aim of providing long term funds for primary producers and in obtaining capital sources for these loans. Primary industries are traditionally recognised as low return industries, yet they account for 40 per cent of Australia's export earnings. Without their contribution to our balance of payments we would all be paying considerably more for all goods as our dollar declines in value.


The DEPUTY PRESIDENT —Order! The honourable senator's time has expired.