PM Transcripts

Transcripts from the Prime Ministers of Australia

Transcript 2708


Photo of McMahon, William

McMahon, William

Period of Service: 10/03/1971 to 05/12/1972

More information about McMahon, William on The National Archive website.

Release Date: 01/11/1972

Release Type: Media Release

Transcript ID: 2708

FOR PRESS PM. No. 93/ 1972
Statement by the Prime Minister, the Rt. Hon. William
McMihon, CH, MP
For some time past, the Government has been
investigating the availability of longer term credit to the rural
sector and has already taken a number of policy initiatives in
this field. In 1960, it established the Commonwealth Development
Bank, a high proportion of whose lending is to farmers on
long term. To supplei'. ent trading bank lending on overdraft,
Term Loan Funds were established in 1962 and Farm Development
Loan Funds in 1966, in each case by transfers frnm . the trading
banks' Statutory Reserve Deposits with the Reserve Bank and from
the banks' other assets. The Funds have been added to from time to time
in subsequent years. In 1971, the Commonwealth offered the States
$ 100 million to finance the rural reconstruction scheme, under
which long term loans are ma. Xe to farmers to repay existing debt
and to finance property purchases to build up their holdings to
a viable size. $ 44 million has boeen provided up to June 1972
and a further $ 56 million is included in the 1972-73 Budget.
Also in the Budget is $ 4 million for marginal dairy farm
reconstruction. These steps have resulted in substantial new
long term funds being made available to rural industry.
However, the Government felt that there was a
need for a detailed review7 to be undertaken of the adequacy of the
credit facilities available to the rural sector. The Minister
for Primary Industry therefore directed the Bureau of Agricultural
Economics to undertake such a review.
The Bureau in its report " Rural Credit in
Australia" reached the conclusion that the facilities available
to farmers from existing lending institutions to borrow on long
terms were deficient. / 2

It came to the view that the amount-of long
term lending being undertaken was inadequate, compared with that
desirable to allow shorter term debt to be restructured, to
facilitate property transfer and amalgamation, and to assist
rural industry to adjust to the longer term Pressures facing it.
The 1972/ 73 Budget provided an amount of
million, to be appropriated for purposes of facilitating the
increased availability to farmers of long term loans. The
Government has not yet carried to conclusion its consideration of
the many complex issues involved. Consequently, it was not
possible to bring down legislation in the recently concluded
Session of Parliament. Issues arising include, for example, the sources
of funds from which such lending could be financed and how it
would fit in with existing rural term lending.
The Government has decided that an enquiry should
be held to examine and renort on the feasibility and desirability
of creating a new, separate and viable institution which, taking
its place along with existing financial institutions, would engage
in financing the repayment of existing short term debt and in the
provision of longer term loans for rural industry.
In order to achieve an immediate increase in the
availability to farmers of long term loans, arrangements have
been made between the Government, the Reserve Bank and the
Trading Banks under which the Banks will increase the amount of
long term lending from the Farm Development Loan Funds, for a
wider range of Purposes than hitherto undertaken, and with the
Funds being supplemented for this purpose.
The new pur oses will include finance for
property purchases, assistance in holding together a farming
enterprise where the death of a farm 9proprietor creates financing
difficulties and finance for the repayment of existing short-term
debt. The present maximum term of 15 years for loans from
the Funds will also he remaovea; the general aim will be to match
the terms and conditions of long-term loans to the situation of
the individual borrower. While the present preferential interest rates on
lending for developmental purposes will continue to apply, interest
rates charged on this longer term lending will be commercial rates.
The rates charged in individual cases will, of
course, vary according to the circumstances of the particular. cases,
such as the purpose and term of the loan and the degree of risk.
The interest rate structure, and changes in it
from time to time in accordance with chancges in the general level
of bank interest rates, will be subject to the approval of the
Reserve Bank and the Treasurer. / 13

The Governor of the Reserve Bank will be
making a separate statement about the arrangements; the Funds
are being supplemented by an amount of about $ 65 million.
The Government believes that this initiative
will improve the access by farmers to long-term credit and be
of major assistance to them in achieving a more appropriate
debt structure. Property transfers and amalgamations will be
facilitated, and financing problems arising from the death of
a farm proprietor will be eased.
CANBERRA, 1 November 1972

Transcript 2708