Greed driven banks seek riskier loans

Never satisfied, banks today are saying that they want the federal parliament to allow them to lend voters into even  more risky loans. That is according to the print media. It means risky for the borrowers, not risky for the banks. The banks hold the mortgage over the farm and guarantees from the farmers for the loan repayments. The borrowers risk everything including their loan repayments which can easily be eaten up in bank charges if the loan terms can’t be met. The ever-present risk of fire flood or drought makes it risky. The appeal is in banks being less fussy about lending to farmers. We find that it is more the absence of a good looking loan application that turns banks off farming.

Loan contracts need as much scrutiny as a bull or ram

Few borrowers ever read the restrictive and punitive loan contracts through which they  sell their souls to the bank . The banks make huge profits out of clever Debt Traps. Farmers  tend to over-estimate future profits.  Once the borrowers cannot make the scheduled loan repayments, the bankers jack up the interest rates. So if the repayments were hard before, they become impossible then. That can continue for years before the bank actually forecloses. Then it takes all the repayments and the proceeds of the farm sale. Farmers do need the sort of services we offer at GBAC because expertise in loan financial impact assessments are outside of normal farm skills. That is because they are rarely needed. Because we have run our own sheep and cattle properties, we understand a lot better than many consultants, what can happen with loans.

Bank profits skyrocket and bank tax rates fall

Bigger profits and lower taxes are keeping Big Bank Bosses in the style to which they have become accustomed, while many Australian farm families battle to pay their  bills.  $20,000 to $100,000 a DAY is what big bank CEOs earn. Not bad pay, for a day! Massive increases in profits back those pay packets. In 2023 CBA earned 4,500 times, in real money terms, what it earned in 1971 when I started my Chartered Accountancy practice.

 Big Banks suck money out of the rural economy

The ability of people to put much of their spending “on tick” with the banks has created a spending boom like never seen before. When we no longer need money to buy what we want, life is fabulous. Champagne and caviar all round. Problem is that the interest just adds a little bit more to the price of what we buy. If we leave it on the account or card, then it can make a huge difference. The hangover begins as the debt becomes too high to bring down. We pay into Big Banks large amounts of money for what we buy, but big banks are cutting back on what they spend on customer services. Bank closures abound in the bush and city. We may end up  typing messages on the laptop to a chatbot that pretends to have  a conversation with us about our banking needs. Or, we may be told that due to an abnormal increase in phone traffic our wait time will be about 1 hour. Money is moving from consumers to banks via many businesses selling on credit, so banks are rich and the customers are poor. The gap widens and people often need to borrow more money even for farm essentials like fuel. That is when the Debt Trap works best. People needing supplies to continue operating just want the loan. Only later will they think about what happens if they don’t do what the loan contract requires.

Not just farmers, but public services too

That the big banks are sucking money out of our economy in profits and are being taxed at highly discounted tax rates, explains why our economy cannot afford to fund rural and regional schools, hospitals, police and emergency services plus many of the other public services that we used to enjoy. The pay rates for university educated nurses, teachers, police and emergency workers, even in the highest ranks, pale into insignificance compared to the Big Bank CEOs 100% loan mark up There is no need for banks to charge the interest rates they do.  Their profits make so much money the banks don't know what to do with it. Some just give it back to shareholders. There can also be a problem with the specialist farm lenders with government backing. Some good loans at cheap interest rates are available. However, many of these lenders are not seeking financial profits. Being government backed they are promoting higher productivity in order to boost the Australian economy and generate more taxes. That can cause a reduction in farm profits or even  conversion from profit to losses for some family farms. The financial impacts of government funded lending need to be carefully checked. The weather is a lot more dependable in parliament house than out on the farm where it can make a huge difference to income.

Customer alternatives

Farm borrowers have a few good options. First they can hunt around to find the best possible bank loans. Rather than go to a bank-paid broker  they can use the Borrow Better website I set up to quickly find and negotiate the best loan deal from their viewpoint. That by-passes the brokers who will be paid $8,000 or more by the bank to deliver a borrower to them, like the farmer delivers stock to the abattoir. Famers can engage a Banking Consultant to help protect them financially and a lawyer to help with the legal protection they need. They can also join Bankwatch and help persuade the elected parliament to develop a farmer focussed banking industry with a government bank  like CDB and PIBA used to be, to boost customer care and  provide fixed interest loans. Pause migration-driven population increase They can also ask Federal Parliament to pause immigration other than farm labourers for 24 months to allow schools, hospitals and other public services and home building to take a deep breath and catch up with demand and so lower prices and the cost of living. It is the quite reasonable demand for goods and services from 500,000 immigrants this year plus some immigrants bringing lots of money with them, that is causing the price rises. Australia cannot supply the goods and services to meet the current demand. The city focus of that growth deprives the bush of what it needs. Let’s stop and take a deep breath before we move on. It is always wise to expand then consolidate, expand then consolidate.