100% premium quality products

Agribusiness lending hits six-year highs as confidence in sector surges

Lending to Australian agribusinesses has hit a six-year high, according to figures from the Australian Bureau of Statistics.

The weaker local currency and strong interest in agricultural assets from overseas investors has been driving the demand for finance in the sector, according to CommSec chief economist Craig James.

Growing personal incomes across Asia are seen as a positive sign for Australian exporters, particularly those selling food perceived as safe.

But low interest rates have also seen many in the sector consolidating their debts.

Mr James said there were mixed messages in the numbers about how confident farmers were about the future.

It comes at a time when a number of Australian farmers talk confidently about the prospects coming from Asia.

“But mixed in there is a degree of caution, because when you’ve got super-low interest rates, it’s a time for going to the bank and trying to consolidate some of your debts,” Mr James said.

“So I think we’re seeing some of that in the current environment as well.”

Lending has also increased in the finance, insurance, health and manufacturing sectors, with all experiencing a lift in borrowing during the past year.

But sectors like mining, constructions and transport, however, have gone backwards.

The Australian Banking Association’s executive director Tony Pearson said the profitability of the sector had increased by over one third throughout 2015, indicating that while there were still farmers facing tough times because of drought, the sector’s financial outlook was improving.

“Farmers are financing a range of new activities, buying new machinery and equipment, investing in new irrigation or fencing and building new sheds,” he said.

Source: http://www.abc.net.au/news/2016-03-14/rural-lending-up/7244276