12 Aug 2016

Banks should pass on OCR cuts - farmers

6:21 am on 12 August 2016

Federated Farmers says banks should pass on the Reserve Bank's cuts, because it is not in their best interests to have farms topple over and impact negatively on their books.

Federated Farmers vice president Andrew Hoggard

Federated Farmers vice president Andrew Hoggard Photo: Radio NZ / Jemma Brackebush

The Reserve Bank has cut its cash rate this morning to a record low of 2 percent and signalled it's ready to cut again.

A rural debt negotiator says banks have told some debt laden dairy farmers their credit facilities could be stopped and rates could rise.

Federated Farmers dairy chairperson Andrew Hoggard said he was also aware of similar situations.

"It's been reported to us by Rural Support Trusts' that supposedly farms that are viewed as higher risk have had their margins increased, obviously this makes it even tougher for those farms and probably puts them in a higher risk category again."

Mr Hoggard said he did not think it was fair.

"Higher risk comes with the need for higher margin, but in this case this is a pretty 'out there' scenario we're facing and it could topple people over - which I don't think is in the banks best interest because if too many people topple over well that effects their (the banks) books just as much.

"The prudent thing for banks to do in this situation would be to be passing on Reserve Bank cuts, by and large they shouldn't be treating farmers differently to home buyers in Auckland, I wouldn't want to see them passing on less to farmers than they are to other borrowers."

Farmer morale is up on the back of last week's [http://www.radionz.co.nz/news/business/310010/dairy-prices-make-gains

6 .6 percent rise in the Global Dairy Trade Auction], Mr Hoggard said, and he hoped next weeks auction will be another lift.