Citizens Electoral Council of Australia

Media Release Friday, 12 December 2014

Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Email: cec@cecaust.com.au
Website: http://cec.cecaust.com.au

Rural debt crisis demands government action, not empty threats or promises

Barnaby Joyce’s empty threat to the banks over farm foreclosures, and his pathetic offer of $100 million roll-over loans to farmers, will not solve the rural debt crisis. Neither will ANZ’s announcement of a 12 month freeze on foreclosures—the crisis is too big.

Unless the government takes real action, the debt crisis will trigger mass foreclosures of family farms and leave only corporate agribusinesses involved in Australian agriculture.

A paper by economist Ben Rees presented to the 2012 Rural debt Roundtable entitled Rural Australia: Crisis 2012, illustrates the essence of the crisis with a graph showing the relative growth of total Rural Debt and total Net Value Farm Production (NVFP) since 1969.

Click here to view the graph.

In 1969, the two figures were roughly equivalent, around $1 billion. Back then, the debt burden was spread out among more than 200,000 family farmers.

In 2011, 42 years later, NVFP was measured at around $12 billion, but total Rural Debt had exploded to $64 billion!

Worse, this massive debt burden is spread among less than 40,000 family farmers, the number left after four decades of free trade and deregulation (championed by, perversely, the NFF—National Farmers Federation).

Put the banks on a leash

With cases emerging of the banks foreclosing on drought-stricken farmers who have never missed a single debt payment, based solely on property revaluations—usually conducted by valuers in business with the banks—it is imperative that the predatory banks be put on a leash. To rely on voluntary action by the banks is a gamble which the farmers, and the nation, can’t afford.

This must be done through the government imposing an immediate moratorium on farm foreclosures, and through implementing a Glass-Steagall separation of retail and investment banking. The latter will block speculative investment banking operations from siphoning off credit from retail banking for their gambling, that should be available for real economy investments such as agriculture.

Public credit

The government must use its power to issue credit to refinance the rural debt that is legitimate, while the balance should be written off. In many cases, farmers have copped not just above average interest rates, but usurious penalty rates as high as 20 per cent on top, which has made their debt burden impossible. Consequently they have often repaid more than they borrowed, but are still under crushing debt. In those cases the debt should be written off.

Otherwise, the government can immediately announce it will guarantee debt refinancing, just as it did with the Big Four banks and Macquarie in 2008, so that farmers can borrow at the government bond rate of 2-3 per cent. Through legislation, the government could either convert the Reserve Bank into a national bank, or establish an entirely new National Bank, and direct it to issue long-term low-interest credit for agriculture.

The volume of credit required is in the tens of billions of dollars, not the token $400 million that the Gillard government offered in low-interest loans, or the even more pathetic $100 million that Barnaby Joyce announced this week.

Parity pricing

Deregulation and free trade have left family farmers at the mercy of rigged international commodity markets and the Coles-Woolworths retail duopoly. They are consistently forced to take prices below cost of production, while prices for consumers constantly rise. This is the driver for the massive expansion of rural debt.

The solution is parity pricing, as it operated in the US during and just after WWII, when by legislation farmers were guaranteed a price that covered their cost of production. The Congress legislated parity pricing to help the war effort, in two ways: to guarantee food security; and to boost national income. The architect of the scheme, Carl Wilken, proved that every dollar earned on farms generated $7 in national income—the highest multiple of any sector. Parity pricing worked so brilliantly that farm borrowing dropped dramatically, because the farmers were able to finance their crops and production from farm income; this is known as the Golden Era for US agriculture. Not happy with their loss of farm business, it was the Wall Street banks which pressured Congress to end the scheme in 1952. (Click here for a 4-page PDF of a 2013 address by US farm leader Frank Endres explaining the parity pricing scheme.)

It’s time to fight for a solution to the farm crisis that doesn’t accept the premise that farmers are just another business, like coffee shops and casinos, but values them as constituting a strategic industry which produces our food supply and therefore requires national support. Join that fight, by joining the CEC.

The CEC has written legislation for a national bank and a debt moratorium. It is ready to go! Click here for a free copy of our Glass Steagall Now! pamphlet which includes a summary of the national bank legislation.

SPECIAL ANNOUNCEMENT: The ALP, Liberals and Greens are ganging up to make it harder for other parties to contest elections, by tripling the membership requirement. If you support the CEC’s ideas, it is time to act by joining as an Associate Member for one year, so the CEC can remain registered. Click here to join the CEC as a member.

Click here to refer others to receive regular email updates from the Citizens Electoral Council of Australia.