THE PRESS TUESDAY, JUNE 24, 1986. Farm debts up in the air

Press, 24 June 1986, Page 20

THE PRESS TUESDAY, JUNE 24, 1986. Farm debts up in the air

The Cabinet has made up its mind on what the Government will do about restructuring farm debt. The Prime Minister, Mr Lange, said yesterday that these policies will be announced “probably next week.” Meanwhile, farmers and their creditors continue to stew over the possibilities that Mr Lange raised more than a week ago when he hinted that private lenders would have to join the Government in writing off the debts of farmers who have been crippled by high interest rates and falling land values. In spite of the great deal of adverse reaction to this proposal, and with an apparent indifference about the uncertainty it has caused in the money market, Mr Lange has done nothing to dispel the thought — which he planted — that debt write-offs will be a part of the Government’s package. If anything, his confirmation yesterday that all the final decisions have been made, coupled with his reluctance to reject the write-off formula, has tended to confirm for many people that wholesale writing off of farm debt indeed will be a part of the restructuring package. Lenders, understandably, are horrified at the thought; farmers, the supposed beneficiaries of such a course of action, are equally dismayed. They see all too clearly a parallel with the Depression measures, such as the Mortgagors and Tenants Relief Act, which soured relations between farmers and lending agencies for decades, and for some time made it almost impossible for farmers to raise money by way of mortgage. Confidence in farm lending would be

shattered again by the enforced writing off of debt. The farmers would have lost immeasurably more in the long term than they might stand to gain immediately. Already there are signs that some lenders are acting in anticipation of the threat’s being made good, either by declining to renew such loans as are due for renewal, or by trying to off-load their commitment under loan arrangements that still have time to run. The uncertainty is aggravating the farmers’ plight already. The room for such manoeuvrings, however, is limited in the sea of farm debt that amounts to some $8 billion from private lenders alone.

Aware of this, most of the lenders to the farm sector — banks, finance houses, insurance companies, and stock and station agents chief among them — have attempted to formulate a realistic, co-operative plan for restructuring farm debt, looking carefully at each individual case; but the possibility of widespread debt write-off has all but put this plan in limbo. The long-awaited — and frequently deferred — package of Government policies to ease the pain of the Government’s drive to subject agriculture to the doctrine of the free market is now due next week. However palatable or practical the measures it contains prove to be, its announcement at least will have the welcome effect of dispelling the present uncertainty. If wholesale debt write-offs are not part of the package, Mr Lange will be hard put to find an excuse for not having grounded his kite before now.