Farmers paying down debt - $1b cut since Sept

Bank lending to farmers had fallen by $1 billion since its peak in September last year, says the Reserve Bank. Photo / Mark Mitchell

Bank lending to farmers has fallen $1.013 billion from its peak in September last year, Reserve Bank figures on sector credit for April show.

Fonterra is expected to pay out an extra $2.2 billion to dairy farmers this year as a boom in commodity prices boosts farmer incomes, but doesn't necessarily boost farmer spending through the rural economy.

The government and many economists have expected much of the windfall gains from high commodity prices to help boost the economy generally over the next year to 18 months, but there are increasing signs that farmers are choosing to bank the receipts rather than spend it.

Many have long memories from 2009 and 2010 when banks enforced spending freezes or increased lending margins. Some are also wary of a rise in interest rates later this year and early next year.

There is also the prospect that banks may further increase lending costs for farmers and tighten credit because of changes to the 'capital overlay' rules for farm lending due to kick in next month.

The sector credit figures showed agriculture lending falling to $47.249 billion in April from $47.480 billion in March and a peak of $48.262 billion in September last year. It is down 0.1 per cent from a year ago. This is the first ever annualised fall in farm lending since the series began in December 1990 when farm debt was $5.07 billion.

Meanwhile, business lending rose to $73.359 billion in April from $73.091 billion in March.

It is up 1 per cent from a year ago, the strongest annualised growth in business lending since July 2009.

Bank lending against housing rose to $171.832 billion in April from $171.588 billion in March, which represented a 1.4 per cent rise from a year ago.

Consumer lending rose to $11.891 billion from $11.828 billion and is down 0.7 per cent from a year ago. Total household lending at $183.723 billion was up 1.2 per cent from a year ago.

This means business lending rose $268 million in April, household lending rose $308 million and farm lending fell $231 million during the month


INTEREST.CO.NZ