Canterbury farm financiers urge change in Government policies

Press, 25 October 1985, Page 23

Canterbury farm financiers urge change in Government policies

Canterbury’s farm, finance and business leaders have urged representatives of the Government to change exchange rate, interest rate and inflation control policies. This is because of the damage that these policies are doing to farming and the rural economy in the short term, although many of the province’s leaders do support the intentions of the Government.

The M.A.F. in the region has forecast that 60 per cent of Canterbury farmers will be in financial difficulties.

“The financial structure of the rural community within Canterbury will collapse without a substantial reduction in the value of the dollar, the inflation rate and interest rates across the board,” said Mr Bob Dewar, assistant managing director of the stock and station agency, Pyne, Gould, Guineas Ltd. He was speaking to three Government members of Parliament at a meeting of the Canterbury regional rural finance committee last Friday. These were the Minister of Trade and Industry and associate Minister of Finance, Mr Caygill, and the members for Yaldhurst, Mrs Margaret Austin, and for Sydenham, Mr Jim Anderton. Mr Dewar was one of many farm leaders, financiers, bankers, businessmen and civic leaders who make up the rural finance committee. This was formed during the 1982-83 drought and has proved very valuable to the rural community. “The current Government policy is having an immense effect on reducing farmers’ income, has increased interest bills substantially and has done little or nothing to reduce the costs of inputs into farming,” said Mr

Dewar. “If continued, the current policy will have long term effects on the confidence in farming by both the farming community and in particular the financiers.

“Long term finance and seasonal finance from the private sector will disappear,” he said. Farmers could not be asked to go it alone without Government assistance without time to diversify and for the processing industry to gear

up. Even though a certain percentage of farmers might have to leave the land, it was clear that couldn’t happen overnight, he said. Replacement competent farmers or managers were simply not available or willing to take the risks.

“We need a change in the direction of Government policies sooner rather than later,” he said, “and before we have 50 per cent of this year’s wool clip in storage with our traditional buyers going elsewhere.” Representing the trading banks, Mr Brian Johnstone, of the A.N.Z. Banking group, said bankers had a real problem in assessing how far they were prepared to go in financing the majority of capable farmers who are being badly hurt by the effects of drought, high interest rates, adverse exchange rate movements, removal of S.M.P.s, and increased power and road user charges. “As outlined in the M.A.F. report, a large number of farmers are facing deficit budgets for the coming year and regardless of their equity and ability, there is a limit to which a financier can prudently lend unless there is a definite prospect of viability in the foreseeable future,” said Mr John-

stone. “There is also the question of how we are going to ease out of support for those who have to sell without causing a wholesale collapse. “We feel it is not generally appreciated that Canterbury farmers have suffered two droughts which have exacerbated their problems, particularly with the increasing cost of servicing very substantial drought relief loans. “Those that diversified into cropping have now been penalised by the exchange rate as a direct result of the float. “We do not see suspensory loans in isolated areas being the answer if agriculture as an industry is to survive and remain viable. “The current and increasing value of the New Zealand dollar is effectively locking us out of overseas markets while climbing interest rates and farm inputs are compounding the problem.

“The borrow and hope philosophy is not an option for most farmers who are not coping with their existing commitments. “They cannot afford the luxury of hoping for an improvement in overseas markets, a reduction in interest rates or in the dollar and as lenders we cannot be expected to increase our exposure on such a basis. “Obviously there are a number of farmers with a large equity and low debt servicing that will cope and we will support the majority particularly where there is adequate security and a good track record.

“It is the ones in a critical position that are the problem. “A major catastrophe would result if we all decided to withdraw support; a move that could probably

be justified in the absence of light at the end of the tunnel.

“Apart from our direct involvement with the fanners, we are also concerned at the sudden impact of the farmers’ plight not only on the service industries but also on the urban community as a whole and our concern is that the extent of the problem is not fully appreciated, particularly by the policy makers,” said Mr Johnstone.

The Canterbury Chamber of Commerce told the Labour M.P.S that it accepted in general the move towards a free-market economy. It also accepted that many of the transition problems may be blamed on the interventionist and protectionist policies of previous administrations, said Mr A. M. Jolly, the president of the chamber.

“However, we do not accept that there is only one strategy for freeing up the economy, nor do we accept that any one sector or region of the country should carry an unfair share of the burden of change,” he said. “At present it seems that

one sector, fanning, is being harder hit than other sectors by the transition of the economy. “The chamber does not see why the agricultural sector should not have had the same stepped transition as has been given to manufacturers.

“Many farmers in Canterbury are in a grim economic position and their plight will worsen over the next year. “Many retail and service businesses in rural Canterbury towns are already noticing a downturn in demand.

“The region’s mid-to-long-term prospects are good. High hopes are held for horticultural ventures such as apples, stone fruit, and perhaps vineyards. “In industry, electronics and software are showing international competitiveness and tourism is developing rapidly. “The region’s tertiaryeducation facilities in the University of Canterbury, Lincoln College, and Christchurch Polytechnic will contribute to new knowledgebased industries for the ur-

ban community and to an ever-more scientific agricultural sector. “But in the short term some help must be given to farming, and thus the region, to allow the continued progression towards these goals. “Further, the Canterbury Chamber of Commerce is concerned that any economic distress in the South Island caused by failure to help the farming community will cause a backlash against a free economy. “Undue hardship in the countryside, and later the towns, may well lead to a political reaction, the electorate seeking a return to protectionist polices. This result would not be in the interests of the country,” said Mr Jolly. “Therefore, the chamber asks that help be extended to farmers to allow them to adjust without harsh suffering. “What a waste it would be if all the skill and enthusiasm of young farmers trying to develop properties on low equity and high borrowing were put into the discard,” he said.