Banks Want Farming Loans

Press, Volume CVI, Issue 31196, 21 October 1966, Page 3

Banks Want Farming Loans

(N.Z. Press Association)

TAURANGA, Oct. 20. New Zealand was at present in the middle of its most severe post - war cre d it squeeze a credit squeeze which was likely to become more severe.

It was against this economic background that the farming sector of the community was being given “very favourable treatment” in the matter of credit —but within the framework of the Budget. This was the essence of an address to the Tauranga Rotary Club by Mr R. O. Smillie, research director of the Bankers’ Association. Mr Smillie said New Zealand's trading banks were mindful of the fact that the

country's farms were its greatest natural resource—that they grew grass better than almost anywhere else in the world and that New Zealanders had to exploit this natural advantage to the limit. But on the other hand it was an unhappy fact—which the banks deplored—that bank advances to farmers had remained virtually static at around £3O million to £35 million for the past decade. The relative contribution of banks to the total farm finance had shown a considerable decline.

“This trend of events has been against the wishes of the banks. It has been a direct consequence of the direct controls over bank lending which have been applied continuously during the post-war period by the Government, through the Reserve Bank,” he said.

“The over-all effect of these controls has been to curb the expansion of the banking industry at a rate much less than the expansion of the whole economy.” The Government, in applying the controls, had “very rightly” indicated that special consideration had to be given to farming and export industries.

“Within the limitations put on bank lending there is provision for priority to be given to farm lending and to lending which will contribute to the expansion of our exports. “As a result of these priorities there has been a marked swing in bank lending toward the farming and allied industries,” he said.

This year’s targets for farm lending would allow some slight increase in advances to farmers during the coming season. But this did not mean unlimited finance.

New advances to the farming industry made by trading banks would be restricted in the main to seasonal finance.

Stock and station agents had for the past decade been lending more money th farmers than banks. From about 1958 to 1964 the seasonal peak of their loans to farmers was about £4O million, but in the past two seasons this had increased to reach £65 million last March.

“I need hardly remind you that the stock and station agents are not subject to direct Reserve Bank controls,” Mr Smillie said. “The galling aspect to bankers is that the stock firms’ expansion of lending in the past two years has been largely financed by bank overdraft.” Last year the peak of bank overdrafts to stock firms was about £l7 million—a figure which could well be reached again this year.