Pass today’s interest rate cut on, urge farmers

The National Farmers’ Federation (NFF) has welcomed today’s announcement by the Reserve Bank of Australia (RBA) that interest rates will be cut by 25 basis points. NFF President Jock Laurie said the reduction in interest rates, taking the cash rate to three percent for the first time since April 2009, was very welcome news for the agricultural sector at a time when the agricultural boom is sharply in the spotlight. “What we’ve seen over the last few months is a real focus on the future financial and investment potential of Australian agriculture,” Mr Laurie said. “And while there is a very positive future outlook for farmers and for agriculture – particularly in light of the Government’s focus on the Asian century – in order to capitalise on the future opportunity, we must ensure farmers are in a stable financial position in the here and now. “Today’s interest rate cut to three percent means farmers will be better placed to meet their financial obligations. It is also good news for farmers as it means less pressure on the Australian dollar, which is currently sitting at 104 US cents after reaching highs of 110 US cents last year. “We know that every one per cent appreciation in the Australian dollar pushes our farm income down by around $220 million in raw terms due to our high reliance on our export markets, so a weakening Australian dollar and an interest rate cut combined spell good news for the sector. “Of course, we now await the reaction of the banks to this rate cut with interest. The NFF’s Agribusiness Loan Monitor, which tracks the movements of financial lender’s agribusiness loans against the official interest rate, will show which banks, if any, have followed the RBA’s lead this month. “The November Loan Monitor showed that eight banks have made some reduction in their rates since the October RBA rate cut, however of these, only one bank – BankWest Agribusiness – has passed on the full 25 basis points, and then only to their agricultural overdraft customers. “Today, we urge all financial lenders to pass the benefit of today’s rate cut on to farmers, to help promote and stimulate future growth in the agricultural sector,” Mr Laurie said. The full results of the November NFF Agribusiness Loan Monitor are available http://www.nff.org.au/publications.html#cat_2119[here], while the December Monitor will be released in mid December. The Monitor is compiled each month by leading money market monitor Canstar and published by the NFF as a tool for all Australian farmers.