Finance Minister Bill English has ruled out a Government bailout for struggling farmers to prevent widespread foreclosures.
“The Government has in place a system for dealing with hardship because you are going to see, for a small number of dairy farming families, some real distress.”
That is appropriate, a bailout isn’t.
The Government’s role was to provide a stable framework, such as low interest rates and favourable changes to the Resource Management Act (RMA), he said.
The dairy downturn is a short term problem. A stable framework provides a long term foundation which enables businesses to survive and prosper.
“If the opposition want to support the dairy industry they should vote for the TPP (Trans Pacific Partnership) and the changes in the RMA.” . .
These won’t alleviate the short term pain of the low milk price but they will improve the medium to long term outlook.
Labour leader Andrew Little has called for banks to be “stiff armed” into not forcing dairy farmers off their land, warning that could see more farms fall into overseas ownership.
That is the sort of irresponsible and stupid behaviour you might expect in a banana republic.
Banks and farms are private businesses and government has no business meddling in them.
Some farms were subject to forced sales when the milk payout was above $8.
There will be some now it is so low but that is a matter to be sorted out by the banks, the farmers and their advisers.
His call came amid calculations by the Reserve Bank that in a worst case scenario up to 15 per cent of the $40 billion in dairy farm debt – equivalent to more than $5 billion – could be lost to the banks. . .
That is very much a worst cast scenario.
Predictions in the mid to late 1980s that large numbers of farmers would be forced off their farms were wrong.
Banks knew that a flood of forced sales would depress land and stock values, further eroding equity and making the situation worse for lenders and borrowers.
That hasn’t changed.
A few of the worst cases will end in forced sales and those businesses which haven’t already acted to reduce costs and/or find other income will be on a very tight rein.
But banks will be prepared to let most businesses get through this. When, as it will, the milk price improves they will start addressing structural issues with those businesses which have them.
Something that appears to have escaped Little, is that small businesses which service and supply farms are probably more at risk than farms and no-one is suggesting they be bailed out.