National Farmers' Federation

Rural Debt and Access to Finance

Ensuring access to finance to support small businesses, including farm businesses, is of vital importance to the agricultural sector and rural communities, ensuring these businesses can continue to grow their contribution to employment and the economy.

At the same time, rural debt levels have increased significantly in the last decade – rising by over 85 percent since 2002-03. The rising debt is due in part to prolonged drought followed by flooding rains, and also investments in on-farm capital works as farmers look to improve productivity.

While these investments in capital works should hold farmers in good stead into the future, total farm debt levels at above $60 billion place the agricultural sector at considerable exposure to increasing credit costs. Should the banking sector withdraw its support of the agricultural sector and aggressively foreclose on rural debt, there is potential for regional land prices to fall.

Tightening monetary policies are also having an increasing impact on Australian farmers and posing challenges for the agricultural sector. The NFF believes there is a need to build competition and transparency in the banking sector, improve the understanding by the Reserve Bank of Australia of regional economic conditions, revisit tax based investment mechanisms for regional Australia, and build the education and awareness of risk management tools for farmers.

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