Earlier this week the banking royal commission called for an end to the current state-by-state mediation schemes to implement a nationwide approach to farmers in distress.
BDO supports the adoption of an integrated national legislated approach to Farm Debt Mediation.
Most banks have been supportive of the process and, in fact, often offer Farm Debt Mediation in circumstances where the primary producer may not have qualified for it. It should be noted that uncertainties do arise under the various state based schemes given:
- Many primary producers have multiple properties, some in more than one state, thus falling under more than one scheme
- The definition of farm debt varies as to what is included
- The debt level threshold for the application of Farm Debt Mediation varies
- Provision of mediation under one state scheme may not always comply with the requirements under another state based scheme creating uncertainty for both the primary producers and the banks.
We expect the banks would be supportive of a national scheme, as Australian Banker's Association CEO Anna Bligh has confirmed yesterday, as it will allow them to more consistently apply the mediation process across their agriculture sector customer base. Many of the recognised or registered mediators already work across state boundaries. A national farm debt mediation scheme could allow them to efficiently undertake the mediations, and potentially reduce costs.
However, it should be noted that there does not appear to be any systemic non-compliance or issues with the current schemes. While the recommendation for a National Farm Debt Mediation scheme appears to be low hanging fruit for the Banking Royal Commission, this perhaps should be a lower priority issue for consideration by the Commissioner.
To give this matter some context, a cattle producer in Queensland doesn’t really care if the arrangements that apply to him (when facing severe financial stress) are different from those that apply to a wheat farmer in Victoria. Banks have historically all acted in a disciplined way with high integrity throughout the formal mediation process. Our view is that the proposed approach to achieve national consistency, whilst commendable, really wouldn’t have much of an impact upon individual borrowers.
What would really make a difference and benefit everyone involved in the Farm Debt Mediation process would be to make the appointment of advocates mandatory.
Our view is that the Royal Commission should consider insisting that every borrower has an experienced and qualified advocate representing them throughout the mediation process. This would be in addition to the appointed mediator, who in no way represents nor negotiates with the Banks on the agribusiness borrower’s behalf. This would help ensure fair, reasonable, considered and achievable outcomes are produced from every mediation.
In Queensland, an agribusiness experiencing distress can seek more information by contacting me or talking to QRIDA about the options available.