Andrew Little wants banks 'stiff armed' into not forcing dairy farmers off land

Finance Minister Bill English says banks' dairy losses not a threat to economic stability.
LAWRENCE SMITH/FAIRFAX NZ

Finance Minister Bill English says banks' dairy losses not a threat to economic stability.

Labour leader Andrew Little has called for banks to be "stiff armed" into not forcing dairy farmers off their land, warning that could see more farms fall into overseas ownership.

His call came amid calculations by the Reserve Bank that in a worst case scenario up to 15 per cent of the $40 billion in dairy farm debt - equivalent to more than $5 billion - could be lost to the banks.

Fonterra dropped its forecast dairy payout forecast to $3.90 a kilo of milk solids last week. An estimated 85 per cent or more of farms are not expected to make a profit at that level.

Labour leader Andrew Little calls for summit over dairy industry woes.
ANDY JACKSON/FAIRFAX NZ

Labour leader Andrew Little calls for summit over dairy industry woes.

Little said the banks needed to be "stiff-armed and told we're not going to see, wholesale, farmers pushed off the land".

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He said with some estimates of up to 25 per cent of dairy farmers in trouble, and with the value of land and herds falling, banks might look at their most marginal loans with a view to forcing farmers out.

Estimates suggest up to 25 per cent of dairy farmers are in trouble.
ROBYN EDIE

Estimates suggest up to 25 per cent of dairy farmers are in trouble.

"We expose more New Zealand farm land to the risk of overseas ownership and I think that is a matter in which there is a national interest the Government should be alert to, and take action on."

Labour, the Greens and NZ First have called for help for farmers.

Little said the Government's approach was "cavalier". A summit should be called and dairy cooperative Fonterra should be at the table. Farmers needed to agree on a long term plan for the cooperative to move its products up the value chain, even if that meant taking less cash out once the immediate crisis was over, to allow Fonterra to invest to generate better long term returns.

Government assistance should be provided to get farmers over the crisis, in a similar way to the help offered during drought, but it did not need to be any more than that.

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"It is time for the Government to sit up and take notice and at the very least play a facilitation role if not something more active," he said.

"I'd be surprised if there are many MPs who aren't getting the message from farmers or farming communities about the distress that at least some farmers are under."

Finance Minister Bill English reiterated to TV One's Q and A programme the Government would not provide extra financial backing to farmers.

"Yes, we do rule that out. The Government has in place a system for dealing with hardship, because you are going to see, for a small number of dairy farming families, some real distress. But we're certainly not going to be bailing them out."

He said losses of $5b to $6b by the banks would not pose a threat to the country's financial stability.

English said he was "not overly concerned" that the big banks had not passed on all of the Reserve Bank's 25 basis point cut to customers in terms of lower interest rates last week.

He said that in the long term competition and pressure from customers would have the most impact on the banks' interest rates.

Little also steered away from strong criticism of the banks.

He said if they had all moved their rates down by 25bps on Thursday that would not have helped farmers much because many were on fixed rates.  

The banks at times had got ahead of cuts to the official cash rate, and it was in their interest to "look like they do the right thing". 

"Yeah, its an issue. It doesn't look good. But I am less fussed about that right now than the issues that are affecting the dairy sector."

 - Stuff

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