Francesca Rudkin: We'd all like to see more competition in banking

Fieldays is in full flow at Mystery Creek in Hamilton and there’s a bit for farmers to celebrate this week. Or at least sigh with relief over.   

On Tuesday, the Government announced agriculture would not be included in the Emissions Trading Scheme, and the climate change initiative He Waka Eke Noa would be disestablished and replaced with a new initiative, the Pastoral Sector Group.   

And yesterday the Finance Minister Nicola Willis announced an inquiry into banking competition with a focus on rural banking.   

There are three terms of reference for the inquiry which will be undertaken by the Finance and Expenditure and Primary Production Committees and they are to examine:  

1. The state of competition in the banking sector, including business and rural lending  

2. Barriers preventing further competition in the sector, and   

3. Any possible impact of the regulatory environment on competition and efficient access to lending.  

Nicola Willis believes this will benefit us all and assured us on the Mike Hosking Breakfast this will bring about change. 

“Change needs to happen, and change will happen in the banking sector in New Zealand so that New Zealanders are better served. And I know that the banks are powerful but democracy is more powerful, and this inquiry is going to get to the bottom of these issues.” 

But back to the farmers.   

Also on the Mike Hosking Breakfast this morning was ACT MP and former President of Federated Farmers Andrew Hoggard, who explained why farmers are dissatisfied with banks at the moment. 

“There is definitely a mood of dissatisfaction amongst farmers around how the banks are working with them, and I guess the margins in particular have really... The additional margins over house lending has really hit a lot of farmers, particularly with where interest rates are at the moment. So from a lot of people, the main concern they’re telling us is, you know, interest rates are the key thing that’s creating the hurt right now.” 

So we’ve got this massive increase in the cost of interest charges. Last year an on-farm inflation survey by Beef + Lamb New Zealand found interest costs for sheep and beef farmers increased 86.5% in the year to March. According to the survey, this has been driven by floating interest rates which doubled over that time while fixed, and overdraft interest rates increased by about 50%.  

I think we can all understand how stressful and challenging that would be and the flow on effects to towns and communities that rely on the primary sector to keep them afloat.   

There’s also been a change in behaviour from banks. It’s become harder for farmers to access lending as banks are reportedly more risk adverse and restricted under new regulatory rules from the Reserve Bank, and these are issues that hopefully the inquiry will define and present solutions to.   

One of the other issues is around customer service. There is no doubt that being able to have a conversation with a bank representative who understands your business is a must. Having that one-on-one relationship with one person who understands your needs, your community, and where you’re going is vital. But I would argue, you don’t need a branch to have that relationship.  

It might just be a representative in your area, it might be a relationship over Zoom —companies like One New Zealand are working hard to make sure we have 100% coverage around the country— so maybe farmers, like the rest of us, have to move with the times and understand that relationship with your banker might look a bit different.   

So, if you are a farmer, how important is this inquiry and the issues you’re facing regarding banking? Is it an issue across the board? What impact is banking having on your confidence?   

I am crossing my fingers we will see some action out of this inquiry —call me an optimist or naïve— but I think we’d all like to see more competition in banking. 

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