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Transcript of doorstop: drought meeting with the banks.



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16 December 2002

TRANSCRIPT OF THE HON JOHN ANDERSON MP DEPUTY PRIME MINISTER AND MINISTER FOR TRANSPORT AND REGIONAL SERVICES

DOORSTOP, 16 DECEMBER 2002

Subject: Drought meeting with the banks

DEPUTY PRIME MINISTER:

[tape starts] with the banking and finance sector in relation to farmers and drought. I, in particular, was very keen to extract a commitment that the banks would seek not to impose extra penalties, high management or establishment fees, or margins on farmers who were forced to refinance or take out new borrowings, particularly where those borrowings are to be supported by the Commonwealth. I have to say I'm delighted, I'm genuinely pleased, that the banks have given the Government that assurance. We had a wide-ranging discussion about the duration of the drought. The banks expressed the view that they'd learned much from the early 90s, and I believe the Government has as well. We believe that the key to all of this is supporting farmers as the drought breaks and they start to move to replant or to repurchase stock or take their operations forward. There was a view that the farm management bonds have been quite brilliant for those who have been able to access them. Warren and I were very surprised at the relatively slow drawdown of the farm management deposits at this point in time, which is suggesting that many farmers are not as yet needing to look again at refinancing their operations. The impression we gained, though, is that certainly our fears that there'll be real difficulties when the drought breaks and farmers go to replant their crops, that's when the stress will come.

JOURNALIST:

Were there any new measures?

DEPUTY PRIME MINISTER:

No new measures, but the very welcome commitment from the banks that there'll be no penalties or unfair management or establishment fees when farmers either rearrange their current loan arrangements and finances or take out new loans, which, as I say, are to be supported by the Commonwealth in Exceptional Circumstance areas. So in a sense that is a new development and a very valuable one. It was the one that I was primarily after, and I'm very thankful the banks have given it.

JOURNALIST:

Will it be extended to small businesses affected by the drought?

DEPUTY PRIME MINISTER:

They've indicated that they very strongly support our attempt to hold together regional economies. I was struck by the fact that David Murray, who of course is not only from the Commonwealth Bank but also the head of the Australian Banking Association at the moment, made the comment that those banks see the farm sector not as low-tech, but as a high-tech, knowledge based industry that has to be preserved. They see the small business sector that services farmers, whether it's agricultural consultants, the contractors, the plant and machinery agents and their mechanics, as integral to that high-tech, knowledge based industry.

JOURNALIST:

[inaudible]

DEPUTY PRIME MINISTER:

It does in the sense that the commitments are there not to use excess or spiked margins, or unnecessarily high establishment fees. So that will do two thinks. It will facilitate the refinancing of farms that need refinancing, and it will reduce the cost of them doing so.

JOURNALIST:

[inaudible]

DEPUTY PRIME MINISTER:

Yes, and the other thing that we've agreed to do, although we haven't finalised the mechanism for it, is to establish a proper set of consultative arrangements for Members of Parliament in particular who are contacted by farmers facing difficulties with their particular banks. That's important. The other point that I would raise, though, is that it is very important for farmers to stay in close contact with their financiers, not to shy away or to be slow in coming forward to explain their situation or their potential need. I do get the impression that keeping the channels of communication and trust open are going to be very important for making this whole package work.

But the thing that I welcome is that the banks have committed themselves, having congratulated the Commonwealth for our willingness to stand with the farmers, they've committed themselves to standing with the sector as well, that is a welcome commitment.

JOURNALIST:

What about the farms that have gone, they have no capital, they've got no breeding stock, even refinancing won't help them?

DEPUTY PRIME MINISTER:

That's a very interesting question, and both Warren and I probed at quite some extent on that. All of the banks insisted that they have only a very small proportion of

farmers on their books in that situation at the moment. They've actually given us some figures, which of course I have to accept on face value. What it really tells is that farmers have been able to strengthen their position quite well over the last couple of years. Now I don't have the figures, only the banks do. They assure me that they only have a very limited number - historically a very low number - of farmers who are in danger of not making it. Now that will change rapidly if the drought doesn't break, as the Met Office says its going to, or is most likely to, in March or April. So we sincerely hope that it does.

JOURNALIST:

[inaudible]

DEPUTY PRIME MINISTER:

It's always important to communicate, but in particular, we announced a week ago that we would put in place a whole set of new measures and I wanted to make really certain that the banks understood that we wanted them to work with those new arrangements, not do, as happened in the early 90s, when often those who were supported by the Government would see the banks raise their interest rates and margins or their management fees. Now, we've had a very welcome commitment - that is, if you like, the breakthrough today - a welcome commitment that the banks have learned from the early 90s. In their language, they won't be doing that again. They recognise that it's counter-productive, and they will be working to, if you like, make our assistance package work for farmers. That, in a nutshell, is what I wanted, and the Government wanted. The proof is in the eating, but I welcome the commitment from the banks today.

You'll appreciate that a lot of it was private, but their frank assessment of the number of people in real difficulty who at this stage are in danger of not pulling through, suggest to me that the farm sector is in quite strong shape. A lot of farmers have been able to concrete away their position a bit more over the last couple of years. Now there are pockets where the difficulties are extremely serious and no-one, no-one underestimates the personal challenges that many farmers are facing. I think it is welcome news that the banks - in quite a hard-nosed way - said that there were very few people that they don't think they're going to be able to continue to support, particularly in conjunction with the Government package. And that's good news. That's good news.

JOURNALIST:

Mr Anderson, on another issue. Ansett workers, did the Prime Minister talk to you today about that?

DEPUTY PRIME MINISTER:

Look, we foreshadowed that we will be talking at some stage. Interestingly enough, the particular set of issues that you're talking about there really relate more to Workplace Relations than they do to Transport.

JOURNALIST:

Is there any word on ethanol support?

DEPUTY PRIME MINISTER:

A matter under consideration by the Government at the moment. Thank you.

ENDS