Janelle Saffin (Page, Australian Labor Party) Share this | Hansard source

I speak in general support of the sentiments that are driving this motion before us today and that I can see expressed in the motion put before this place by the honourable member for Mallee. Under the national credit reforms phase 2, it is the government’s intention to examine hardship procedures and options available to small business, including farmers. So some of what the honourable member for Mallee is putting forward today can be looked at in phase 2 of those national reforms, and that pleases me.

The honourable member and I have in the past had occasion to speak in agreement before the Main Committee on the issue of managed investment schemes, particularly on the inquiry and report that was tabled about how that was impacting on our respective electorates, because there are some similarities between them. We spoke in support of the impact it was having on the farming community—not just the farmers but also the broad farming community. We talked about the issues of regional royalties, local government involvement and a whole range of other issues, and that is still a work in progress with those respective communities. I put on record that the national laws around consumers in phase 1 have been about fairness—that is, making it fairer—for consumers. Consumers in the case that is before the House are farmers and the farming community—that is, the primary production community.

I turn to the issue of the four parts of the honourable member’s motion. I had a little bit of experience in the area when I was in legal practice. I was in a country legal practice and often used to deal with people from the primary production sector and from forestry. There were not as many laws then, but I acted as an advocate for them beyond being a legal advocate in relation particularly to the banks and the lenders and all the associated issues. Also, I was a member of the New South Wales rural authority, so I had some experience there. The honourable member would know at the New South Wales rural authority does. We used to have the rural banks, and he would remember that. So I have a bit of experience in that area, and, like the honourable member for Mallee, I get hot under the collar about lenders who lean on families, on farmers and on small people that do not have the capacity to fight back. Also, if they are experiencing financial hardship, they are already in trauma and then have to deal with the lenders, and being prevailed upon can make it extremely difficult for them.

On debt recovery itself, across the primary production sector, in the first part of the motion, the honourable member talks about the Australian economy and the consequence of more than seven years of drought. We know that the drought over the last number of years has had a really serious impact right across Australia, but that also brings its own attendant difficulties. I can also say that in my area there have been other climate change events, with floods and frosts and hail storms which have impacted as well. I did look at some figures from ABARE, and they talk about the debt-servicing ratio for horticultural farms—which I have a lot of in my area—being relatively low, at around 8 per cent in particular areas compared with 7 per cent in other areas for 2006-07. The honourable member talks about the need for debt recovery protocols in commercial lending similar to those that exist for mortgage lending, and I have some sympathy for that and would want to examine that more to make sure that we do not do anything that provides a negative impact.

As we know, some states and territories already provide such coverage for farmers who are in debt. In New South Wales, under the Farm Debt Mediation Act 1994, a creditor must give at least 21 days notice to a farmer of intended enforcement action, and mediation is available under the act. I know that in Queensland there is a Hire-purchase Act. I do not know the situation in other jurisdictions, but that is certainly something we can build on. Under these laws, mediation and the temporary suspension of payments allow the borrower time to negotiate a change to their repayment obligations that will avoid or mitigate the risk of further default. But, again, it comes back to the person being in a position where they feel empowered enough to work through that process. Sometimes we need the advocate, and that is what the honourable member is obviously proposing here tonight for some particular constituents, whereas the motion goes to the general.

Also, with the Code of Banking Practice we know that lenders are subject to the Australian Bankers Association code, and once that is adopted by a bank it becomes a legally binding contract between the bank and its customers for which the institution has to be held accountable. We need to make sure that these codes are implemented. Also, under the consumer hardship provisions, I know that under state and territory regulation all lenders—all—have an obligation to consider an application by an eligible borrower who is experiencing financial hardship for a change in repayment arrangements such as making smaller regular repayments over a longer period of time. I can say to the honourable member for Mallee—and he would know about this—that this is sometimes difficult, again, for those borrowers to actually deal with and have enforced. For many lenders, this obligation is reinforced and extended under industry codes of practice. These are some of the areas that can be looked at again in that second phase that I talked about.

This year, in respect of financial hardship principles, the government requested that banks, credit unions and building societies in particular make a commitment to assist borrowers, and the Treasurer announced in June this year the sign-up of these financial institutions to the principles of a common approach for assisting borrowers facing financial hardship. They are important, and I will turn to (3) and (4) in the time I have remaining. The third principle says:

… supports the concept of compulsory debt mediation prior to lenders exercising their rights to pursue recovery through legal processes …

I do have some sympathy for that and, prima facie, it is something I want to support. Given some of the experiences I have had in this particular sector, I would say we would need to consider that carefully to make sure there is no perverse outcome. But prima facie I am attracted to it. The issue we would have to look at is that some lenders may be more reluctant to lend to farmers if the constraints on legal proceedings are too onerous. But, having said that, my sympathy is clearly with the farmers and the associated farming businesses.

I know that, with the debt mediation process in New South Wales, before a creditor can take possession of property there is a range of things that need to happen. I would also like to commend the work of our rural financial counsellors in debt mediation and debt agreement administration. I have not had an opportunity today to talk with my wonderful local rural financial counsellors and servers and get their take on the motion that is before the House. I have been in conversation with them over the time that I have been a member and they have been able to inform me broadly about extra things that need to happen. Thank you.

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