Farm finance less readily available

Press, 4 March 1983, Page 21

Farm finance less readily available

Taken over all, finance for farming has been less readily available in the June 1982-83 year compared with 1981-82. This is noted by the Agricultural Review Committee in the finance section of its

annual report, released this week.

The committee says that from about June to October 1982, the growth in deposits of the financial system, and in particular of the trading banks, was very slow. As a result the ability of institutions to lend became increasingly constrained.

“Financial intermediaries initially responded to this reduced deposit growth by running down reserves to maintain lending. This could not be continued for long and since October there has been a slow-down in lending growth,” the committee says.

“Lending to the farming sector has generally followed this trend.”

At the end of September 1982, loans outstanding to the rural sector from financial institutions reporting to the Reserve Bank were 18 per cent above the level in September 1981.

“Since September there has been some slow-down in lending. Trading bank lending to farming rose by 8 per cent in the year to December while trading bank lending in aggregate grew by 13 per cent.” The committee says that over the last two to three months the lending capacity of the trading banks has improved compared with the September quarter. “Given these conflicting indicators it is difficult to ascertain the cause of the slow-down in lending to farmers. In contrast, provisional figures for the September quarter show the rural sector has generally maintained its share of finance advanced from financial institutions other than trading banks.” The committee says lending by the stock and station agents to farmers during 1982 has been particularly slow, with total lending increasing by 2.5 per cent in the year to December.

“Seasonal finance from stock and station agents and trading banks could be tighter this season compared with last season, but with the growth in trading bank deposits there may be some easing of this situation later in the season,” the committee says. “A key factor, however, will be the response of the trading banks.” The Rural Bank continued to provide a substantial portion of the funds available to the fanning sector. Rural Bank loans outstanding to farmers at the end of September were §1728.7 million, 18 per cent above the level of a year earlier. The committee says the Rural Bank expects to approve total lending of §434 million in 1982-83, compared to §465 million in 198282. Of this, settlement loans account for §145 million, the same level as in 1981-82. Looking to the future the committee says that in common with other sectors of the economy, the farming sector has been affected by the tighter monetary conditions of recent months. “However, in the longer term, fanners tend to benefit from a reduction in the rate of inflation and the Government’s monetary policy stance is a crucial element in achieving this.”