Francesca Rudkin: We'd all like to see more competition in banking

Fieldays is in full flow at Mystery Creek in Hamilton and there’s a bit for farmers to celebrate this week. Or at least sigh with relief over.   

On Tuesday, the Government announced agriculture would not be included in the Emissions Trading Scheme, and the climate change initiative He Waka Eke Noa would be disestablished and replaced with a new initiative, the Pastoral Sector Group.   

And yesterday the Finance Minister Nicola Willis announced an inquiry into banking competition with a focus on rural banking.   

There are three terms of reference for the inquiry which will be undertaken by the Finance and Expenditure and Primary Production Committees and they are to examine:  

1. The state of competition in the banking sector, including business and rural lending  

2. Barriers preventing further competition in the sector, and   

3. Any possible impact of the regulatory environment on competition and efficient access to lending.  

Nicola Willis believes this will benefit us all and assured us on the Mike Hosking Breakfast this will bring about change. 

“Change needs to happen, and change will happen in the banking sector in New Zealand so that New Zealanders are better served. And I know that the banks are powerful but democracy is more powerful, and this inquiry is going to get to the bottom of these issues.” 

But back to the farmers.   

Also on the Mike Hosking Breakfast this morning was ACT MP and former President of Federated Farmers Andrew Hoggard, who explained why farmers are dissatisfied with banks at the moment. 

“There is definitely a mood of dissatisfaction amongst farmers around how the banks are working with them, and I guess the margins in particular have really... The additional margins over house lending has really hit a lot of farmers, particularly with where interest rates are at the moment. So from a lot of people, the main concern they’re telling us is, you know, interest rates are the key thing that’s creating the hurt right now.” 

So we’ve got this massive increase in the cost of interest charges. Last year an on-farm inflation survey by Beef + Lamb New Zealand found interest costs for sheep and beef farmers increased 86.5% in the year to March. According to the survey, this has been driven by floating interest rates which doubled over that time while fixed, and overdraft interest rates increased by about 50%.  

I think we can all understand how stressful and challenging that would be and the flow on effects to towns and communities that rely on the primary sector to keep them afloat.   

There’s also been a change in behaviour from banks. It’s become harder for farmers to access lending as banks are reportedly more risk adverse and restricted under new regulatory rules from the Reserve Bank, and these are issues that hopefully the inquiry will define and present solutions to.   

One of the other issues is around customer service. There is no doubt that being able to have a conversation with a bank representative who understands your business is a must. Having that one-on-one relationship with one person who understands your needs, your community, and where you’re going is vital. But I would argue, you don’t need a branch to have that relationship.  

It might just be a representative in your area, it might be a relationship over Zoom —companies like One New Zealand are working hard to make sure we have 100% coverage around the country— so maybe farmers, like the rest of us, have to move with the times and understand that relationship with your banker might look a bit different.   

So, if you

Episode Transcript

Speaker 1 (00:06):
You're listening to the Carrywood and Mornings podcast from newstalksd B.

Speaker 2 (00:12):
Right Field Days are in full flow at Mystery Creek
in Hamilton and is a bit for farmers to celebrate
this week or at least sigh with relief over On Tuesday,
the government announced agriculture would not be included in the
emissions trading scheme and the climate change initiative how woker
Echino will be disestablished and replaced with a new initiative,

(00:33):
the Pastoral Sector Group. And yesterday the Finance Minister Nikola
Willis announced an inquiry into banking competition with a focus
on rural banking. So there are three terms of reference
for the inquiry which will be undertaken by the Finance
and Expenditure and Primary Production Committees, and they are to

(00:53):
examine the state of competition in the banking sector, including
business and rural lending barriers preventing further competition in the sector,
and any possible impact of the regulatory environment on competition
and efficient access to lending. So there are actually things
that are going to impact us all. Nikola Willis believes
this will benefit us all and assured us on my

(01:17):
costing breakfast this morning. This will bring about change.

Speaker 3 (01:21):
Change needs to happen, and change will happen in the
banking sector in New Zealand, so that New Zealand is
a better served And I know the banks are powerful,
but democracy is more powerful and this inquiry is going
to get to the bottom of these issues.

Speaker 2 (01:34):
But back to the farmers. Also on Mike Costing Breakfast
this morning, while the ACDMP and former President of Federated
Farmers Andrew Hoggard, who explained why farmers are dissatisfied with
banks at the moment.

Speaker 4 (01:47):
There is definitely a mood of dissatisfaction amongst farmers around
how the banks are working with them. And I guess
the margins in particular recently have really the additional margins
over houselending has really hurt a lot of farmers, particularly
with where interest rates are at the moment. So from

(02:09):
a lot of people, the main concern that telling us
is interest rates are the key thing that's current and
the hurt right now.

Speaker 2 (02:17):
So we've got this massive increase in the cost of
interest charges. Last year, an on farm inflation survey by
Beef and Lamb New Zealand found interest costs for sheep
and beef farmers had increased eighty six point five percent
in the year of March, according to the survey. This
has been driven by floating interest rates, which doubled over

(02:39):
that time, while fixed and overdraft interest rates increased by
about fifty percent. And I think we can all understand
how stressful and challenging that would be and the flow
on effects to towns and communities that rely on the
primary sector to keep them afloat. It's not just about
the farmers, but where the farmers spend their money. It's

(02:59):
also been a change in behavior from banks. Apparently it's
become harder for farmers to access lending is banks are
reportedly more risk adverse and restricted undernew regulatory rules from
the Reserve Bank. And these are issues that hopefully the
inquiry will define and present solutions too. Another complaint is

(03:19):
around customer service. Now, there is no doubt that being
able to have a conversation with the bank representative who
understands your business as a must. Having that one on
one relationship with a person who understands your needs, your community,
where you're going is really important, right, But I would

(03:41):
argue you don't need to have a branch to have
that relationship, and this is something which the rural community
is saying we need to keep that. We need to
continue to have bank branches in our communities. Look, it
might just end up being a representative in your area.

(04:01):
It might be a relationship over zoom. Companies like One
New Zealander hard to make sure we have one hundred
percent coverage around the country when it comes to being connected.
So maybe farmers, like the rest of us, have to
move with the times and understand that a relationship with
your banker might look a little bit different. We've all

(04:21):
had to do that, haven't we. So Look, if you
are a farmer, how important is this inquiry and the
issues you're facing regarding banking? Is it an issue across
the board? Because when I was watching TV and Z
one news last night and there's a couple of farmers going, no,
that's fine, good relationship with the bank, don't have a
huge amounity, everything's fine. So what is banking? What impact

(04:45):
is banking actually having on your confidence? Look, I'm crossing
the fingers we'll see some action out of this inquiry.
Call me optimistic or naive, but I think we would
all like to see more competition in banking, but I'm
keen to hear from the farmers in particular. Is this
good news? Is the situation that you're dealing with with

(05:06):
your bank, is that really having a massive impact in
your confidence in your business and the way you're going
about your business?

Speaker 1 (05:13):
And is this a good call for more from carry
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