New Zealand's biggest farmer and banking lobby groups are welcoming a new Government bill which aims to ease the burden of farmers in financial distress.

Cabinet yesterday approved legislation which would require the creditors of farmers – such as banks or other loan-providing organisation – to provide mediation to farmers who have defaulted on debt before any enforcement action is taken.

Agriculture Minister Damien O'Connor said the failure of a farm can lead to a farmer and their family losing both their business and their home.

He said the bill was designed to ensure some "balance and fairness for farmers, in a situation where they would otherwise be powerless".


"This [bill] won't guarantee that farmers walk away from their debt, it won't guarantee that the bank misses out on what it's entitled to – but it does put in place a fair process.

In many regional parts of New Zealand, one farm's failure can have ripples throughout the rest of the community and across the regional economy, O'Connor said.

"The Bill is pragmatic. The guts of it is early intervention – where either the farmer or the bank have an ability to go and seek mediation, which is a far better option than forced foreclosure."

Speaking at her weekly post-Cabinet press conference, Prime Minister Jacinda Ardern said the bill would ensure protections were in place to help indebted farmers negotiate with their banks, rather than being forced off their farms.

According to Reserve Bank figures, total farm debt in New Zealand is $62.8 billion – that's up 270 per cent over the last 20 years.

"Farmers are especially vulnerable to business downturns as a result of conditions that are often outside their control, like weather, market price volatility, pests and diseases like Mycoplasma bovis," O'Connor said.

The cost of the mediation will be split between the farmers and the bank, but O'Connor does not expect the scheme to cost too much.

But he did admit that more mediators would need to be trained.


The Bill has been given the tick of approval by Federated Farmers as well as the New Zealand Bankers Association (NZBA).

NZBA said banks know the role farmers play in the economy and that it's important they succeed.

"The industry supports farm debt mediation to provide clarity and another option for farmers."

Federated Farmers said the bill was a useful tool.

"Although we hope this legislated farm debt mediation won't have to be used very often, it will have done its job if it helps banks and farmers find enduring and sustainable solutions before it is too late."

O'Connor said the bill seeks to address an issue that has been around for a while.


In fact, it was initially a members' bill in the name of NZ First MP Mark Paterson.

He said the bill offers a fairer system and is in the best interest of all parties.

It's since been reworked and reintroduced as a Coalition Government piece of legislation.

Deputy Prime Minister Winston Peters, who was also at the post-Cabinet press conference, welcomed the bill.

"This bill has been needed for a long, long time and I'm very delighted that at last … [the scheme] is up and running."