Bollard counters Key's farm sales 'fearmongering'

Reserve Bank Governor Alan Bollard. Photo / Mark Mitchell

The head of the Reserve Bank has rejected claims by Prime Minster John Key that restricting foreign ownership of land could force Kiwi farmers from their properties.

Mr Key this week warned Labour's policy restricting foreigners from buying farms in this country meant land prices would fall.

"Those farmers that have a lot of debt on their property will find that they owe the bank more than their property is worth and will be forced off the land and I don't think that's healthy."

Yesterday, however, as Reserve Bank Governor Alan Bollard appeared before Parliament's finance and expenditure committee, Labour MP Shane Jones asked if local banks would face challenges if New Zealanders only were able to buy dairy farms.

Dr Bollard said he doubted that would be "particularly significant" in terms of the value of the assets against which banks made loans.

"The Governor was repudiating what Prime Minister Key was fearmongering about," Mr Jones said later.

Deputy Governor Grant Spencer said the riskiness of banks' lending on dairy farms increased following the global financial crisis but had now stabilised.

Dr Bollard said the most exposed borrowers had been helped by the recent pick up in dairy prices and the RBNZ was "not particularly concerned about what we see now".

While the Prime Minister has also said Labour's policy was little different from his own Government's approach or the existing Overseas Investment Act, Labour said it would bind ministers to a stronger clearer set of criteria when they consider overseas applications to buy farm land.

Lobby group Save Our Farms this week welcomed Labour's policy as a "giant leap in the right direction" and spokesman Tony Bouchier said his group believed National, mindful of public concerns around foreign ownership of farms, would further toughen up its own policy.