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Australia's farm finances holding up.

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Australia's farm finances holding up

AFFA03/012T 13 March 2003

Despite one of the worst droughts on record, Australia's farm finances are in reasonably good shape, and the arrival of substantial autumn rainfall could spark a surge in rural investment, Parliamentary Secretary to the Minister for Agriculture Forestry and Fisheries Senator Judith Troeth said yesterday.

Speaking at the 13th meeting of the Agricultural Finance Forum (AFF) in Canberra, Senator Troeth said that, considering the widespread impact of the drought, feedback from rural lending institutions on the state of farm finances was encouraging.

"The lending institutions were pleased to report a lower than anticipated level of loan defaults, and relatively modest draw-downs on deposits and over-draughts," Senator Troeth said. "This has mostly been attributed to sustained low interest rates. Forum members expect a rise in investment levels as farmers replant crops and rebuild their herds - subject to the arrival of good autumn rains."

AFF is chaired by Senator Troeth and draws together high-level representatives from the agri-finance and primary production sectors - including the National Farmers' Federation, the Australian Bankers' Association, the four major Australian banks, leading pastoral houses, rural financial counsellors and professional accountants.

"The Forum provides an important indicator of the financial health of the rural economy, with representation from the institutions responsible for the vast majority of farm finance," Senator Troeth said.

The Australian Bureau of Agricultural and Resource Economics (ABARE) estimates the drought will reduce Australia's rate of economic growth in 2002-03 by 0.75 percentage points, or about $5.7 billion, underpinning the broader implications of a downturn in the rural economy. ABARE also estimates a total winter crop for 2002-03 of 15.4 million tonnes, down by 24.2 million tonnes on last year.

However, Senator Troeth said that if the drought breaks in time for a winter crop to be planted, ABARE forecasts the gross value of farm production will rise by 17 per cent - from $30.5 billion in 2002-03 to $35.7 billion in 2003-04.

"Despite the positive forecasts, it is important to keep them in context. Even with the recent rains, the significant impact of the drought cannot be underestimated - particularly for our livestock industries," said Senator Troeth. "The drastic fall in stock numbers over the past 12 months will mean that this sector is likely to take four to five years to fully recover."

The Forum considered a range of other issues including:


recent changes to the Farm Management Deposits scheme; ●

Farm Help welfare payments to help farmers in hard times; ●

Exceptional Circumstances business funding for drought relief; and ●

succession planning.

The Agricultural Finance Forum is scheduled to next meet in July 2003.

Further media inquiries:

Senator Troeth's office: Allison Murphy (02) 6277 3002 or 0408 917 639.