Like just about everything else involving the dairy debacle, the facts surrounding the Commonwealth concessional loans for dairy farmers and their roll-out in Victoria has been clouded in confusion.
A big thank you to the office of Minister for Agriculture and Regional Development, Jaala Pulford, for answering Milk Maid Marian’s questions.
- Who can apply?
The Commonwealth Government has indicated the loans will be available to farm businesses that supplied milk to Murray Goulburn and/or Fonterra in 2015-16. Evidence of a milk supply contract and/or statement in 2015-16 to Murray Goulburn and/ or Fonterra will be required to prove eligibility. The Victorian Government has sought changes to eligibility requirements to enable suppliers of other processors to access the scheme. Changes have also been sought to ensure share farmers and young farmers can access loan arrangements. The Commonwealth has not made the requested changes.
- $30 million is available while the Federal government is in caretaker mode. This won’t cover many farms. Why must the rest wait until after October?
The Commonwealth Government’s Dairy Support package includes $55 million in Dairy Recovery Concessional Loans until 31 October 2016. The Commonwealth has offered loan amounts of $30 million to Victoria; $10 million to New South Wales; $10 million to Tasmania; $5 million to South Australia.
Victoria has sought advice from the Commonwealth on loans available after 31 October 2016 arguing that Victoria’s allocation of the total $550 million pool should reflect that 70% of Australian dairy farms are located here. The Commonwealth have not provided advice on future allocations.
- How much can individual farmers access? Originally, media reported that half a farmer’s debt up to $1 million could be borrowed but recent media reports indicate a cap of $200,000.
The Commonwealth Government has determined loan amounts will be up to 50 per cent of total eligible debt to a maximum of $1 million. Eligible debt means debt that has been established upon commercial interest rates, terms and conditions and/ or debt to a dairy processor.
- What is the interest rate and is it fixed or variable?
The interest rate is variable and set by the Commonwealth Government. As at 1 June 2016 the rate is 2.71 per cent.
The Commonwealth Government variable interest rate will be calculated based on the average of the daily 10 year Commonwealth bond rate over a specified six month period. The concessional interest rate will be reviewed and revised if necessary in accordance with material changes to the Commonwealth 10 year bond rate, where a material change is taken to be a movement of 10 basis points (0.1 per cent). The rate will be published on Rural Finance’s website.
Victoria has sought changes to the scheme so that farmers can access lower interest rates available under the Natural Disaster Relief and Recovery Concessional Loans scheme. This scheme provided rates of 1.67% to storm affected farmers in the Sunraysia in 2014. The Commonwealth has not made the requested changes.
- What if banks hold land titles as security for loans and don’t want to relinquish it to Rural Finance?
Based on previous experience with other Commonwealth Government Concessional Loans scheme, this scenario is rare.
- Many farmers are reluctant to apply for drought loans because the process and criteria are too difficult. Have you been able to make it simpler for farmers to apply for these concessional dairy loans? If so, how will they be different and are the criteria publicly available?
The Commonwealth Government determines the eligibility and requirements for the Dairy Recovery Concessional Loans. Victoria has sought a number of changes to improve eligibility criteria but the Commonwealth has not made the requested changes.
- Minister Pulford quoted as saying only 70 farms will access the loans. What is the basis for that figure?
The estimate is based on the experience of other previous and current Commonwealth Government concessional loans schemes in Victoria. The figure assumes full subscription and the average loan amount of previous comparable schemes being around $450,000.
NOTE from Milk Maid Marian: At the time of writing, Rural Finance was taking registrations of interest for the concessional loans. Call 1800 260 425.