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Wednesday, 9 October 1985
Page: 927

Senator BOSWELL(5.26) —The annual report of the Primary Industry Bank of Australia covers the bank's activities in its provision of long term loan funds to the rural sector. I note that the bank now has loans of over $1 billion to more than 11,000 primary producers. Most of these loans are long term loans between 12 and 20 years. It would be fair to say that the bank is succeeding in its objectives to make funds available to the rural sector for long term growth. I also note that the two main reasons loans are being sought from the Primary Industry Bank are for land acquisition and loan restructuring. Loan restructuring is particularly telling as it reflects the enormous problems currently being faced by the rural sector of Australia.

The Bureau of Agricultural Economics estimates that the average farm business debt will be in excess of $50,000 this financial year. With the returns to farm capital now less than 2 per cent per annum the problems that farmers face in servicing this debt are enormous. Farm income this year is estimated to be only one-fifth of this debt. So it is clear that farm returns are down while farm costs and, in particular interest rates are up. It is interesting to note that interest rates have now become the farmers' main on-costs. Their main on-cost used to be fuel prices but it is now interest rates. Escalating interest rates are causing farmers many worries. The National Farmers Federation has estimated that interest rates now account for 7 per cent of farmers' total costs. It is clear that the Hawke Labor Government must accept responsibility for this unreasonable impost on the farmers of Australia.

When the Australian dollar plummeted this year due to Labor mismanagement the Labor Government had to work out some way to prop up the dollar so that it did not completely fall off the face of Australia. The mechanism that this Government hit on was to order the Reserve Bank of Australia to tighten up the money supply so that money was scarce and interest rates were high. This allows foreign investors to get a very high return on their money and it evens up the flow of money in and out of Australia. Of course, interest rates were already under upward pressure as financial institutions struggled to finance the big deficits of this Labor Government which continue to grow. As a result interest rates have now gone through the roof. The small business person, the first home owner and the farmer have suffered and have had to bear the brunt of these rises.

Interest rates have hit especially on two fronts: The farmer who has borrowed heavily to improve his land or acquire new land and, more importantly, the farmer who has borrowed to survive. I am referring now to the cane farmers of north Queensland. The effects of the high interest rates could have been shielded from farmers if the current Government had not broken its own policy platform when it abandoned the income equalisation deposit scheme. This scheme would have allowed the Primary Industry Bank to function as the Liberal-National Government intended it to function. The Primary Industry Bank was originally set up to take advantage of the IED scheme. In good years farmers had the right to deposit in the Primary Industry Bank and farmers who were not so fortunate in those years had the right to withdraw from that bank. The scheme allowed farmers to invest in the IED scheme in good times and to withdraw funds in bad times.

This scheme, coupled with tax averaging, was a self-help scheme that did not cost the taxpayer a cent. It would have protected farmers from the current Government's inefficiency which has caused these disastrously high interest rates. However, because of the Australian Labor Party's blinkers which enable it to say that anyone involved in primary production is a tax cheat, this scheme was abolished. This is just another example of Labor's insensitivity to rural producers.