Farm debt mediation schism between Australia and New Zealand
Mediation could give farmers a lifeline, reports Rob Stock.
Australian small business commissioner, Geoff Browne, is urging New Zealand to adopt a rural debt mediation service, similar to the one operated across the Tasman Sea.
New Zealand banks, politicians and farming groups are currently opposed to giving farmers the legal right to mediation before a bank can call in loans
Yet in Australia, a push is on for the successful Victoria and New South Wales farm debt mediation laws to be taken nationwide - a move that is supported by banks there.
The schemes in Victoria and NSW don't clamp down on banks' power to act if loans are in default.
But they but do require them to offer farmers the chance of negotiating a negotiated solution first.
Here, the New Zealand Bankers Association and Federated Farmers oppose the introduction of a similar scheme, saying it is unnecessary. And Primary industries minister, Nathan Guy, has said he will not be backing NZ First MP Ron Mark's private member's bill that calls for a similar farm debt mediation scheme.
Geoff Browne, the Victorian Small Business Commissioner who heads the Victorian rural debt mediation service, said he could see only gains for New Zealand, if it followed Victoria's example.
"We have high levels of success, if success means the proportion of farmers and creditors walking away with signed agreements," Browne said. The proportion was 96 per cent, he said.
Browne said banks' satisfaction with the scheme was shown by their attempts to get farmers to agree to mediation, even if they ignored the offer. Satisfaction rates with the scheme from both farmers and lenders was 94-95 per cent.
He said the Australian Bankers Association was pushing for a nationwide scheme, and he could not understand why the New Zealand banks wouldn't support a similar scheme in New Zealand.
"They should talk to their Australian colleagues to see what their experiences are," Browne said.
He said arguments the scheme added lengthy delays and costs to banks collecting loans didn't stack up.
Ron Mark is scathing about resistance to farm debt mediation. He said: "We have a culture here in New Zealand where people resist something until they are forced to do it."
His debt mediation bill was partly prompted by the behaviour of banks which mis-sold complicated swap loans to farmers leading to a Commerce Commission investigation and millions of dolalrs in compensation.
The main argument for opposing the scheme are claims the relationship between banks and farmers are good.
Antony Buick-Constable, chief executive of the New Zealand Bankers' Association said: "Given the general positive nature of the working relationship between farmers and banks in New Zealand and systems currently in place, a farm debt mediation scheme may not be necessary.
Primary Industries Minister Nathan Guy said: "In general banks have a vested interest in farmers not going bankrupt; they want them to succeed and do well.
"The Government won't be supporting this Bill as it is unnecessary. There is no evidence of many major relationship breakdowns between farmers and their banks," he said.
"The Bill would simply add another layer of red tape by forcing mediation, and wouldn't guarantee a favourable outcome for farmers."
The Banking Ombudsman and the Commerce Commission were available to hear complaints from farmers, he added.
Dr William Rolleston, Federated Farmers national president, said it had debated the issue several years ago. "The conclusion farmers came to was generally the relationship between the banks and their customers worked pretty well."
And, Rolleston said, he had never heard of a farmer asking a bank for mediation, and the bank not agreeing.
Rolleston considered there could be an argument that New Zealand bankers better understood farmers than Australian bankers, where farming was a more minor part of the economy.
With stress in the dairy sector so bad that prime minister John Key acknowledged as many as ten per cent of dairy farms could fail, Mark believes the time is right for his bill.
"There have been suicides already, and there will be more coming. There are a whole bunch of kids who will end up standing by their dads' coffins at a funeral, and that is a fact."
IS FARM DEBT DIFFERENT?
The farm debt mediation acts in Victoria, NSW, Canada and the US imply there is something different about farm debt compared to, for example, household mortgage debt, or urban business debt.
Ron Mark said: "Farm debt is totally different to the debt of the corner dairy, and the local garage. We are talking about intergenerational debt."
Andrew Moffat, a farm debt mediator and former director of ANZ Institutional Bank in Australia, agreed. He conducted a mediation earlier this week where the farmer involved had literally been born on the kitchen table at the farm. "It was a farm created by the great grandfather," Moffat said, and the farmer had a nine-month old child.
"He genuinely sees himself as a custodian of an intergenerational family business," Moffat said.
He said that kind of emotional attachment did not exist in the case of the owner of a widget factory in a city.
Moffat said: "The business he runs is also his home. We are talking about his home, his business, his identity as a farmer, as well as all the intergenerational stuff."
That, Moffat said was a unique concentration of factors.