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Lending to Primary Production Customers
02/08/2017
Regulation and practices of financial institutions in relation to primary production industries

NASON, Mr Charles, Private capacity

YABSLEY, Mr Robert Charles, Private capacity

[16:47]

CHAIR: Before the committee starts taking evidence in this open mike session I remind all witnesses that, in giving evidence to the committee, they are protected to parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. I ask witnesses to remain behind for a few minutes at the conclusion of their evidence in case the secretariat staff need to clarify any terms or references. I now welcome Mr Bob YabsleyRobert Yabsley. I understand, Mr Yabsley, that information on parliamentary privilege and the protection of witnesses and evidence has been provided to you.

Mr Yabsley : It has.

CHAIR: You are comfortable with the media and recording?

Mr Yabsley : Yes.

CHAIR: We are limited in time, as you know.

Mr Yabsley : I appreciate that. I don't think I'll take a great deal of time.

CHAIR: Quite a few people have travelled a long way based on the open mike. I now invite you to make a short opening statement, and at the conclusion of your remarks I will invite members of the committee to ask questions.

Mr Yabsley : Firstly, I thank you for the opportunity to put forward my grievances regarding the treatment by the National Bank of Australia of the companies I controlled, and in which I held considerable equity. Further, to fully understand what happened I believe it is important for the committee to understand a little of my background and experience in rural business and management. My experience includes five years as overseer on a 50,000-acre property in northern New South Wales starting in 1957, two years as acting manager for Levers Pacific Plantations in the Solomon Islands, where I was responsible for, and had the control of, over 300 staff. My job was to get the stock that had gone wild during the war and gone into the jungle, to fence the plantations and get the stock back onto plantations and under control.

I followed that by five years as manager of the Simple Pastoral Company near Casino, northern New South Wales, where I developed the subtropical pasture and established a Hereford breeding herd. I followed that by two years as an agricultural consultant in Merriweather, here in Queensland, and began my own business with the purchase of a property near Wyrallah in New South Wales in 1972. I added three properties in the same area between 1972 and 1978, and I also share-farmed 1,200 acres west of Moree.

CHAIR: So you had a diverse and successful experience?

Mr Yabsley : Reasonably successful, but what I did following that is the reason for these comments. I purchased a property, Mobandilla, in 1983 and began developing it firstly for dryland farming followed by irrigation. In 1985, I purchased a 20,000-acre property at Pembroke, south-west of Surat in Queensland. During the following two years I moved a herd of Hereford breeders from Wyrallah properties to Pembroke and progressively sold the smaller properties in New South Wales.

In 1995 I started managing an investment scheme, the Mobandilla Cotton Project, and sold Mobandilla to the entity but retained a controlling interest. In 1997 a further prospectus raised funds to purchase the adjoining property, Kingabilla, together with its water licences. In 1998 a third prospectusbecause we had been so successful and investors were looking for further investmentMobandilla Project 2, was sold and a property was purchased, Morocco, on the Balonne River, north of St George.

In 2000, a fourth prospectus raised funds to purchase and develop the irrigation of a property on the Ballyalla River, north of Clermont. The 2000 prospectus was slow selling due, I believe, to changed government policy regarding MIS schemes. Directors got nervous and closed the prospectus in the middle of June, which was just before the real selling period, being the last two weeks of June, being tax-effective projects. This decision left my company, RC Yabsley Pty Ltd, with a debt of $1.4 million, which could not be met. The debt was principally incurred in purchasing the property and clearing it. We had a land clearing permit on the property which only had some months to run. The settlement of the property was extended, which left us very little time. We couldn't wait to do anything if we were going to go ahead with our operation, which we proposed doing with the prospectus the following season, in the following year. Then we had to have it cleared; so I spent the money doing that.

RC Yabsley Pty Ltd was also the company that did the day-to-day management and development of all the properties aforementioned. As the previous owner of Mobandilla, it had the equipment and the staff it needed to do this. The expectation was that the debt of $1.5 million would be repaid from prospectus raisings. When the prospectus was closed without this volume of funds being raised, it could not be paid. At this point I was advised by the in-house accountant we had at Mobandilla in the office to seek further advice, and to this end I approached Ernst & Young in Brisbane for assistance to work out a way forward. Their advice, after a few days, was to put that company, RCY, into receivership. I agreed to do this at a meeting with the NAB on the basis that Ernst & Young would come to the Mobandilla office the following week to work out the best way to move forward with the other companies. Ernst & Young arrived the following Wednesday and, just after five o'clock on the Friday, came into my office and advised me that all my companies were now in receivershipthat was six of them.

CHAIR: So you went to Ernst & Young to get advice?

Mr Yabsley : Yes.

CHAIR: A week later they came, and NAB appointed them as receivers?

Mr Yabsley : Yes.

CHAIR: But you didn't talk to NAB about that?

Mr Yabsley : I didn't talk to NAB about it.

CHAIR: So Ernst & Young were purely advisers to you?

Mr Yabsley : They were working for me.

CHAIR: As advisers?

Mr Yabsley : Yes.

CHAIR: And NAB appointed them as receivers?

Mr Yabsley : Yes.

CHAIR: Thank you.

Mr Yabsley : They had access to all the files in the office, which would not normally have been available to them, either. Then the decision was made, and they were appointed receivers.

CHAIR: Outside your knowledge the decision was made by NAB to appoint EY?

Mr Yabsley : Yes, absolutely.

Senator WILLIAMS: That's not uncommon when banks appoint receivers; no-one is informed, are they?

Mr Yabsley : No. But it is illegal to use your own people as receivers, as I understand it.

CHAIR: Could NAB get access to your accounts, or was it too complex, with the intricate structure of companies?

Mr Yabsley : No; they were public companies. They were freely available. They asked me to vacate the office on that Friday and engaged a security guard to stop me gaining further access. However, they had not done their homework and quickly realised, with a little prompting, that the complex arrangements of an MIS scheme prevented them from selling the assets. I remained in the homestead, despite them having the power and the telephone disconnected. During this period, share farmers were farming a property, using the stored water we had, to grow sorghum crops. This receivership went from 201 to finally 203, which will become evident shortly.

I was on my way to a meeting, and I had many, with NAB in Brisbane when my wife called me to tell me that the telephone and the power had been disconnected. I had a further meeting with NAB in Sydney, which I thought was to find and work a way forward, but it quickly became apparent that all they were doing at this meeting was crossing 't's and dotting 'i's to try and find a way to wind up the system. I drove back from Sydney after that meeting. I arrived home at 4.30, walked past my wife, went to the dining room table and sat down and started writing. I wrote a letter to investors. To cut a long story short, after some time I raised $2 million from those investors.

CHAIR: So there must have been a lot of trust in you from the investors.

Mr Yabsley : There was. We had a terrific relationship, and still do. At the end, if we get something out of this, I will be able to repay them their shareholding.

CHAIR: And you set to work to try and recover the situation?

Mr Yabsley : Yes. With these funds in place, we had a further meeting with NAB in Sydney, which started at 10 o'clock in the morning and finished at 8 o'clock at night, with another director

CHAIR: Who was that?

Mr Yabsley : Who was the other director?

CHAIR: Yes.

Mr Yabsley : Mr Edward Russell, whose company was initially a trustee of these cotton projects, which will come out later. When we got out of receivership I handed over the chairmanship to him and we continued from there. His expertise and knowledge were very important.

CHAIR: So you were the farm expertise and he was the company structure and accounting?

Mr Yabsley : Yes; absolutely correct.

Senator WILLIAMS: What property did you buy with your managed investment scheme?

Mr Yabsley : The first was one was Mobandilla. The second one was Kingabilla, which adjoined it. The third one was Morocco, which was on the Balonne River, and the fourth one was Belyando

Senator WILLIAMS: Your managed investment scheme owned them all?

Mr Yabsley : Yes.

CHAIR: So they unilaterally cut off your power and your phone?

Mr Yabsley : Yes, they did, when I wasn't there. They knew I was on the way to NAB to have a meeting in Brisbane.

CHAIR: They must have thought in their own mind that they had a lot of power?

Mr Yabsley : Absolutely. They had all the power, other than to move me out of the homestead at the time, and to sell the property.

CHAIR: Other than to do what?

Mr Yabsley : To move me out of the homestead. Fortunately, the directors, years before, had a motion in the books that whilst the company was owned by MLCMobandilla Land Companywe had the right to reside in the homestead. So whilst the company was there, they could not move me out. So I virtually sat there and watched other people desecrate the development that I had put seven years into.

After I raised this capital from the investors, I went back to a meeting with NAB, as I said, in Sydney. Most of the argument was over their wanting me to sign an agreement to the effect that the receivers in 2001 had done nothing wrong. We argued about that for hours. I think the only reason we finished at 8 o'clock was because they were trying to catch a plane home to Brisbane.

That meeting resulted in me paying them a million dollars and them releasing us from receivership, with a whole heap of conditions. However, at this time we were left with two properties to manage, no equipment and no staff, as all of that had been sold by the receivers on all the properties, and all the staff had left. So we had these properties back but we had no equipment to operate them or staff.

CHAIR: So the receivers were not intent on running the property?

Mr Yabsley : No.

CHAIR: They were intent on selling it off?

Mr Yabsley : The receivers, as soon as they got control, just put share farmers on.

Senator WILLIAMS: Administrators run properties. Receivers cash in everything.

CHAIR: Thank you.

Mr Yabsley : We could not operate with our own equipment, so we ended up having to arrange share farming to carry on, and a little bit of contract farming. The thing that I am proud of is that the staff who had left and found other employment, en masse ended up coming back to work at Mobandilla going forward.

I suspect the funds from the sale of all of this equipmentand we are talking about $4 million worth of equipment, I might add, between the properties; not that they got that at the sale, but if you had to replace it, which we didno doubt paid the receivers.

As I mentioned we arranged to share farm until we could garner funds to re-equip. This took some time and hindered our ability to make realistic returns. Fortunately, as I said, most staff returned over time. We continued to battle on, eventually getting back to full operation of the properties, re-equipping them. During this time we worked diligently to close the projects. This was one of the discussions we had with the NAB, upon receivership being lifted, that we would do our utmost to lift the impediment. They had to sell the assets but also, by lifting that impediment, it gave us a better opportunity because we had clear assets to offer to raise capital. That took quite some time and involved many shareholders' meetings all over the country, from Perth to Brisbane.

We did this, and it resulted in the project 'share farmers', which was the terminology used for them, because under these schemes they each had a few acres that they leased, to make the scheme work. Winding up the project meant that was all wound upall of those leases had to be wound up. When that was done they still retained their shareholding in the asset, in the property. I make the comment here that as far as I am aware we were the only MIS in Australia that gave equity in the asset to the investors. Most of them just had a management system. As I mentioned, they then became shareholders, which entitled them to dividends from the companies. But it also meant that the assets were available both to us for security and to creditors to sell, and not do the right thing.

The NAB continued to charge penalty interest from mid-2002 to when the property was taken from me in September 2012, at an average of 14.05 per cent. I will make a point here which is not particularly relevant to my issue. If a bank customer is having difficulty paying a particular interest rate, and the bank charge additional penalty interest, it is pretty obvious that this will do two things: (1) it ensures the failure of the customer, because if they could not meet the ordinary interest they are not going to be able to meet the additional interest; (2) it ensures increased profit for the bank through increased interest, when they determine to sell the secured asset.

My office researched fully the difference to our bottom line when the property was seized at the existing interest rateand I do not know what it was, but the average over 10 years was 14.05which created the debt that gave them the opportunity to do what they did in the end. I make that point because I feel this was organised. It was not something that just happened. I feel that the NAB were very embarrassed about the fact that they could not complete the receivership in 2001. They had no option, basically, other than to give us the property back when we could do something, which we did, by giving them a few bob. The only other alternative they had was to go to court and ask for a court to rule that they could do this, and that was very expensive and it would have taken them a long time. If the debt had been an average of 10 per cent instead of 14.05, our debt would have been $5.573 million less. At eight per cent it would have been $7.5 million lessalmost nothing.

CHAIR: What was the total debt?

Mr Yabsley : Twelve. In September 2012 the NAB took possession of the property, evicting my family. At that stage I was 73 years old. I had spent 60 years of my life working towards that position. In early 2013 a flood came through the propertythis was after I had left; I was then living in Toowoombadoing a lot of damage to the irrigation infrastructure, due solely to the negligence of the receiver, despite my verbal and written offer to attend the properties at my expense and provide my 30 years of experience and supervision in protecting the propertylevee banks, floodgates and those types of things. My offer was refused.

CHAIR: We are nearing the end of the time available.

Mr Yabsley : I am nearing the end, too, thank you. Mobandilla was sold by NAB for $12 million, the value of the debt, leaving other creditors with nowhere to go. This was despite a 2011 valuation of $27.2 million

Senator WILLIAMS: Crikey! Valued at $27.2 million and sold for $12 million?

Mr Yabsley : Yes; for the value of the debt. Also, there was a second mortgagee in place that had been helping us to recover, the ANZ bankand I have nothing but praise for the ANZ bank. They organised their own valuation by CBRE, while the property was under duress from the NAB; in other words, close to the end of this period. That valuation came in at $19.5 million.

Senator WILLIAMS: Who bought it?

Mr Yabsley : An almost neighbour just down the road formed a company structure and bought it. He was a chap that I did not know terribly well, but I knew his dad very well. He killed himself in an ultralight crash probably five or six years earlier. He was a good bloke.

I also made a personal offer to NAB in excess of the $12 million. This was before it was sold, so I did not know what it was being sold for. I made an offer in excess of that, which was refused. With respect to the new owner that I just referred to, the receivers stated in a press article in Country Life that it was a failed scheme, that the property was damaged by flooding and that they sold it for $12 million. That is on record and it is in the papers I have given you.

However, also in March 2014, the new owner stated in a press reportand I do not know why he did the report'We had it'Mobandilla'fully operational within three months.' So the damage that was done was rectified in three months and they discounted the price from $27 million to $12 million.

CHAIR: We will have to end soon.

Mr Yabsley : I have half a page left. Can you give me a couple of minutes?

CHAIR: Okay.

Mr Yabsley : Thank you. It may be of interest that my experience dealing with lawyers during this time is that experienced, reputable lawyers will not challenge banks because they use them, they make money from them and they cannot afford to lose these accounts. A lawyer that was working with me was honest enough to advise me of this.

Of further interest, which indicates the attitude of the NAB to its customers, is a paragraph from a letter written by the NAB lawyers to our lawyer which states: 'This is the oldest file in the NAB's recovery section and they want to get rid of it one way or the other.' Thank you for the opportunity.

Senator WILLIAMS: When you have a managed investment scheme, when you buy the farmland, the principal payment for the farmland is tax deductible; is that correct?

Mr Yabsley : What is tax deductible?

Senator WILLIAMS: When you have a managed investment scheme and you buy a farm, the purchase price of the farm is tax deductible.

Mr Yabsley : Yes.

Senator WILLIAMS: That is why I do not like managed investment schemes.

Mr Yabsley : What you do not understand

Senator WILLIAMS: What I am sayinghang on; you have had your sayis this: if a farmer goes and buys a neighbour's place for $2 million, that $2 million is not tax deductible. The interest on it is.

Mr Yabsley : Yes.

Senator WILLIAMS: But when a managed investment scheme buys a place for $2 million, the whole $2 million is tax deductible. It forces the price of land up, in my book.

Mr Yabsley : What you do not realise

Senator WILLIAMS: It squeezes the genuine farmer out.

Mr Yabsley : What you do not realise is that the money that the investor does not pay in tax, the management company does.

Senator WILLIAMS: I am sorry; what was that?

Mr Yabsley : What the investor saves in his tax, in round termsI am not being specificthe management company that manages the business on his behalf pays in tax 12 months later.

Senator WILLIAMS: If they are making money.

Mr Yabsley : No, whether they make money or not.

Senator WILLIAMS: That is the point. The farmer cannot get a tax deduction for the principal price of a farm. Why should someone else get that? That is my point. I do not like that. I think it is unfair to the average farmer.

Mr Yabsley : Okay.

CHAIR: Mr Yabsley, there is a conflict of interest with Ernst & Young?

Mr Yabsley : Yes.

CHAIR: A conflict of interest with NAB, your financier, in dealing with Ernst & Young as well?

Mr Yabsley : Yes.

CHAIR: Is there some collusion with the buyer?

Mr Yabsley : I cannot answer that.

CHAIR: You made a comment yesterday, when we spoke briefly, about unconscionable conduct from the NAB. Do you have any comment on that?

Mr Yabsley : I am sorry?

CHAIR: Yesterday you mentioned to me unconscionable conduct.

Mr Yabsley : I do not know what other accounts may show, but for 10 years we had an average rate of 14.05 per cent, which I think is extreme.

CHAIR: I see; you explained about the interest.

Mr Yabsley : Also, what I found going through the papers earlier is that, had we sold the property in 2010 and had the bank got their $12 million back, in the 10 years leading up to that, we would have paid the NAB $23.5 millionnearly double the debt.

CHAIR: I noticed some pain when you said that when your project was flooded again, after you were in Toowoomba, it was listed as a failure, but I must admit my admiration for you for what you have done in establishing so many properties and doing so well for so long, despite having to deal with this. I sincerely mean that. I admire you for what you have done for the industry.

Mr Yabsley : Thank you, and I can assure John that the government got their tax.

Senator WILLIAMS: Good.

Mr Yabsley : We were one of the only projects of this type that paid their tax. I had the tax office on my property for three days.

Senator WILLIAMS: I wish you had survived.

Mr Yabsley : Had we not paid the tax, we probably would have. Thank you very much, gentlemen.

Senator WILLIAMS: Thank you.

CHAIR: Welcome, Mr Nason. I understand that information on parliamentary privilege and protection of witnesses and evidence has been provided to you.

Mr Nason : Yes, I come from this area and I am appearing as an individual, but probably reflecting a keen interest by me in rural debt for probably the last 10 years.

CHAIR: Thank you. You are comfortable with the recording and the media? I now invite you to make a short opening statement, and then we will invite members of the committee to ask questions.

Mr Nason : Thank you. I think we should thank the witnesses, because some of them have been through very traumatic experiences, and it is brave to bare your soul. I suspect they are only the tip of the iceberg. I probably will exceed the terms of reference. I would like to make some general comments. I only became aware of this a week ago. I took no interest and suddenly decided to come. It wasn't well publicised. I think these things, because they are so important, should be much better publicised.

You can't manage things you don't understand. I don't believe we understand what is happening in the bush, or finances in general. Agriculture is terribly important; it is important to the social fabric of Australia. Food security is very important. One of your submissions which I looked at this morning said that food security is very important. We seem to be concerned about feeding Asia; we don't seem to be concerned about feeding Australia. We are in danger of confusing the symptoms and the root cause. We are addressing the terms of reference regarding bankswhy is it such an issue? With rural debt, the margins are thin and profitability is poor. There is an economist down the road called Ben Reese. I refer you to his website: BenReese.com. His comment is that it's not market failure, it's policy failure. We have failed to recognise the importance of agriculture to Australia. Agriculture is the primary driver of most rural and regional communities; therefore, Australia needs to have this conversation of what we want agriculture to do. Feeding Asia should not be our first priority; we should be feeding our own population.

Julian Cribb has made this comment several times; he reckons agriculture should be as important as defence. Mark McGovern is a lecturer at QUT in Brisbane. He challenges the myth that we export two-thirds of our food production. The reality is that on a net basis it is probably only 20 per cent. So rather than feeding 50 or 60 million people, we probably only feed about 30 million; we're getting very close to that. We should not be talking just about economics but about the social needs of Australiawhat products we have, how many we can feed, and how we are going to do it. The farm debt is close to $80 billion. Farm management deposit is only $4½ billion. So to Senator Williams: in theory, farmers might have access to farm management deposits. The reality is they do not. We should be asking why.

Senator WILLIAMS: I never said they had access to them. I said that in a good year when they make money they can use them to avoid paying tax. That is all I said about farm management deposits. It is simply a way to spread their income over the years to avoid paying tax in a good year and then going down in the next three years.

Mr Nason : The reality is the margins are so slim in the good years that there is still not a great deal there to spread around. We normally catch up on past debts rather than putting anything aside. We should be asking why farm management deposits are not being used enough. In theory they should be; in practice they are not.

CHAIR: What did you say the figure is right now?

Mr Nason : In the last two or three years I think total farm debt was something like $78 billion and farm management deposits were about $4½ billion.

CHAIR: Thank you.

Mr Nason : The Productivity Commission suggested that it was a 70/30 split70 per cent of production was by 30 per cent of farmers. Senator Williams made the point that half are debt free, and I think that's true.

Senator WILLIAMS: That's what NFF told me.

Mr Nason : The suggestion is that the 30 per cent are the most indebted. They are the bigger ones, and they have survived by taking on more debt. It's probably becoming unsustainable. Phil Holmes did a study of the northern beef industry four or five years ago. His conclusion was that in seven of the past 10 years the average beef producer in northern Australia had lost money; they were going backwards. Recent beef prices have probably reversed that slightly. I suspect that in real terms beef prices are nothing fantastic. They still have a long way to go to be a truly sustainable, profitable industry. There is a bit of background reading you should be aware ofyou may or may not be. You need to revisit the 1994 Senate Inquiry Into Rural Adjustment, Rural Debt and Rural Reconstruction. The critical comment made in that report was that rural debt was a symptom of a much deeper cause; they never really went past that. I suspect it is, again, poor profitability in the bush, poor margins. That is policy failure, not market failure.

CHAIR: That was a Senate Inquiry into rural debt and rural reconstruction?

Mr Nason : Yes, rural reconstruction, in 1994. It is readily available.

CHAIR: And the main conclusion was?

Mr Nason : There were a lot of conclusions, but the one I remember well was that debt was a symptom of a much deeper problem.

CHAIR: Thank you.

Mr Nason : Basically, of poor returns. A chap called Dani Rodrik has written a book called The Globalization Paradox. It appealed to my interest in world economics. Ann Pettifor, in Just Money, addresses what Patrick Cusack has said today, 'We don't understand what money is'. I think her conclusion was that money is basically trust. The bit of paper we carry around that has '10', '20', '50' or '100' on it means nothing; it's the promise to pay or hold back by the government. It is trust. You can't commoditise money because it is trust. Another book recently releasedI am not sure if they are available in Australiais called Makers and Takers. The lady who wrote it is the economics editor for American Time magazine. Her conclusion was that the world has become very financialised, andI will put it very simplythat money chases money. Originally money was there to aid production. At the moment, only 15 per cent goes to aiding production; the rest is literally money chasing moneyspeculation. A good example is futures markets. Futures markets were meant to stabilise. Funds chasing commodities have made it more volatile rather than less so, a very perverse consequence.

CHAIR: That connects back with Mr Cusack.

Mr Nason : I am not here to bash the banks. I have heard some very bad stories today, and I think they have fallen down. The way I look at it is that we have provided the wrong rules. They have followed the rules, basically. We have set the wrong rules. Thank you for coming. I hope this will change the rules and put a bit of teeth into them, so they can be enforced.

CHAIR: So what you are saying is that banks are simply made up of people who are working within a system?

Mr Nason : Yes. You have set the rules for the system. I think the rules are wrongor inappropriate. Maybe the question should be asked: if agriculture is so important for the economy and for Australia, should it be left in the hands of private banks? In the past, we had ag banks. The AMP used to lend a lot of money to farmers; a lot of the big developments down south were done by AMP money. We should look at social funding of agriculture. If it has to serve social needs we need to examine how best to do that. I think it is patently obvious in the fact that you are here that the private banking system has not served agriculture very well at all. Probably the parallel question is: have the banks become too powerful? Your role, again, is to challenge that. We should re-examine what our ancestors did. We had co-ops, marketing boards and stuff to help farmers in the past. We have done away with all of those. Maybe we should relook at some of these old structures. They worked well at the time. They were brought in for various reasons. Those who forget history are condemned to repeat the mistakes of the past.

Several people mentioned Rabo. Rabo came into Australia and introduced what I would call 'balance sheet lending'. Lending was based on how much equity you had. I even question the use of equity as a good benchmark for lending. In the old days it was the capacity of industry to pay, or the capacity of a person to pay. The capacity of agriculture with slim margins is very, very poor. Balance sheet lending has probably been a very poor model to follow. Rabo brought it in and the rest of the banks followed to keep market share. We are now seeing the fallout from that. In general, I would say: are the urban banking financial standards appropriate for agriculture? A 20 per cent equity in a bourbon business seems quite happy, quite achievable. But in agriculture it's a recipe for disaster. Even 50 per cent is probably very questionable.

CHAIR: Could that work overseas, where the cycle is much narrowerwith less variation? It is an annual cycle, whereas here it is not an annual cycle?

Mr Nason : Where?

CHAIR: In America; the Midwest, in particular. It is almost like clockwork.

Senator WILLIAMS: They are having a shocking year this year, aren't they?

CHAIR: The shocking year is not so bad.

Mr Nason : They are in trouble this year, I think. But that is the point. Agriculture is probably very unique to Australia. We are literally not subsidised at all or helped. We are on our own. We face enormous climatic variables. We have enormous legislative barriers like restriction on vegetation. Everything seems to be against us. It is probably a credit to the farmers who have survived, that they survived so well in such a challenging workplace and industry.

Senator WILLIAMS: That's right.

CHAIR: Well said!

Mr Nason : If Australia needs agriculture for the future, we need to rethink what agriculture is required to do. With assisted schemes, be very careful what you put in place. My observation, and others agree with me to a certain extent quietly, is that all the assistance schemes that were put in place were well intended. The general comment is they have tended to reward the bad managers and penalise the good managers. I say: reward the ones who don't have a drought rather than the ones who do have a drought. That is a bit politically incorrect, but that is the question we need to ask: what do we want? A good example is QRIDA, which has introduced the First Start Loan for farms, a bit like the first start home loan. My conclusion is that the benefit has gone to the seller, rather than the buyer. That was not the original intention. Land prices around Roma are hitting $1,000 an acre. There is no way you can pay that off with the production on the place.

Senator WILLIAMS: Hang onthat has happened all my life. When Cliff Edge and I paid $180 for country between Jamestown and Caltowie, where I grew up, my father said: 'It will never pay for itself'. That was in about 1974. The price of land, all my life, in what it brings at the retail market has never paid for itselfnever.

Mr Nason : I disagree. There have been a couple of, shall we say, issues with that. In Queensland, which I can speak for, when the Joh Bjelke-Petersen government came in they started to freehold country. So suddenly, instead of being leasehold, the country was freehold. That gave it value in itself. So it couldn't be taken off you, although that is, in hindsight, not quite right. That changed the value of land. Whereas once probably the stock on the place and the country were valued much the same

Senator WILLIAMS: All my life, Sir, good farming country, reliable rainfall country, doubles in price every 10 years, on average.

Mr Nason : Look closely. It's not a linear relationship.

Senator WILLIAMS: Sorry?

Mr Nason : It's not a linear increase. It might do that over time, on a long-term basis, but you have to survive in the meantime.

Senator WILLIAMS: Yes, I know. The price of the land going up doesn't make it earn any more; I'm well aware of that. Does it?

Mr Nason : That's a long conversation I can have with you later. In many cases, the increase in land value has been a change of land use. If you look around Goondiwindi for example, the sheep country

Senator WILLIAMS: Moree.

Mr Nason : Moree is the samewent from sheep country, to wheat country, to cotton country. There is a theory called 'neoliberalism': that is small governments, free markets; the markets will sort it out. I think it is a flawed philosophy, and there are people around the world now challenging that. Some reading will give you background on that. Thank you very much for coming. I think this is the start of the conversation, not the end. We need a much deeper inquiry into the role of the banks, not so much bash the banks for what they have done but: what is their role, what should they do?especially when it comes to agriculture. Maybe the Katter idea of a rural bank or a reconstruction bank needs to be looked at again.

CHAIR: Thank you very much, Mr Nason. That concludes today's public hearing. I thank all the witnesses who have given evidence to the committee today. Thanks also to broadcasting, Hansard and the secretariat.

Committee adjourned at 17 : 31