Daniel McCulloch and Matt Coughlan
(Australian Associated Press)
Australia’s biggest agricultural lender has admitted it lost touch with farmers as it moves to relax rules around loan repayments and make it easier to save for droughts.
National Australia Bank will allow primary producers to offset farm management deposits against loans, with other banks being urged to follow suit.
Farm management deposits allow farmers to remove money from their taxable income during good years to later use during tough times.
“The royal commission and other inquiries reveal that in some cases we have lost touch,” NAB chief executive Andrew Thorburn said in Wagga Wagga on Monday night.
The bank will also no longer charge penalty interest payments on farmers who fall into debt on loans.
NAB came under fire during the banking royal commission for charging struggling Queensland cattle farmers more than $2.6 million in default interest over more than five years.
Agriculture Minister David Littleproud wants other banks to follow NAB, encouraging farmers to “vote with their wallets” and tell banks who refuse to “bugger off”.
Rural Bank has until now been the only lender to allow the FMD offset since it was introduced in 2016.
One in three farmers bank with NAB, meaning the other big banks will face increased pressure to join them in making the change.
National Farmers’ Federation chief executive Tony Mahar is hopeful other lenders will allow greater flexibility for primary producers.
“We need to make sure farmers get through these challenging times and are able to continue to produce food and fibre for Australia and the globe,” Mr Mahar told Sky News on Tuesday.
Mr Littleproud tore shreds off the foreign-owned Rabo bank for “turning up its nose” at Australian farmers last week by ruling out an FMD offset product.
“You have to ask how serious that bank is about agriculture in Australia. It’s fantastic an Aussie owned bank has shown a social conscience and led from the front,” the minister said.
Mr Littleproud also wants other banks to follow NAB on removing penalty interest payments for farmers in drought, urging lenders to reassess the practice more broadly.
“I don’t think the charge truly reflects the cost to the bank. It’s really a kick in the guts when someone’s down, which isn’t the Australian way,” he said.