Farm Debt Mediation Bill

on behalf of Darroch Ball: I move, That the Farm Debt Mediation Bill be now read a first time. I nominate the Economic Development, Science and Innovation Committee to consider this bill.

Before I begin, can I please thank the House for yesterday granting leave for this bill to be introduced. I especially thank the Hon Gerry Brownlee, who last week indicated that the National Party was willing to explore farm debt mediation. I would like to think the National Party is a party that has previously been viewed as supportive of farmers, and I hope that they will join us in supporting this bill.

This bill provides more protection, a pause in proceedings, a cooling-down period as a firewall to help embattled farmers in an unbalanced power relationship. In 1999, when former New Zealand First MP Doug Woolerton got a farm debt mediation bill through the first reading, agricultural debt stood at $11.7 billion. In 2015, when the Hon Ron Mark had a version of this bill in the ballot, farm debt stood at $54 billion. Today, according to the Reserve Bank, agricultural debt stands at $60.7 billion.

Of course, debt is not just a rural issue—household debt to March stands at $260 billion. The reason why we stress rural debt is because it has unique features. Aside from being large, rural debt is concentrated in relatively few hands. Debt is also intergenerational by nature and features heavily in farm succession, subsequently underpinning the cornerstone of New Zealand agriculture, the family farm.

There is another vital dimension in the fact that the farm is also the family home. Farms aren’t like an urban store that can simply close the doors and put the closed sign up. In these exceptional circumstances, animal welfare is a complicating factor. Cows still need milking. Sheep still need to be fed. This bill is a circuit-breaker that allows those critical animal welfare issues to be considered, and best practice to be observed.

Of course, receiverships also impact farm workers, sharemilkers, and contractors and have a flow-on effect to the wider community. Should agricultural debt go bad, it has the potential to start a domino effect that will cascade through the wider economy. This is all interconnected. The Reserve Bank consistently lists the level of farm debt as a risk factor in New Zealand’s financial stability.

Recently, I sat with a family who had lost their farm in a brutal receivership, a farm that had been in their family for 150 years. Their story was one of seeking to grow their business to accommodate the aspirations of their three sons. Through extenuating circumstances, their situation led to financial difficulties. Yes, this is normal business risk. We don’t seek this bill to mitigate against genuine commercial liability. But what that family, and several others, have outlined is a process where a series of decisions that are made under haste and duress have soon spiralled out of control, ultimately left in the hands of unscrupulous secondary lenders. Farmers will do almost anything to retain control of their family farm. Unfortunately, this does not appear to be an isolated case. This bill may well have made a difference to them, and we hope it will make a difference to many more farming families in the future.

We are in the midst of the biggest biosecurity outbreak in New Zealand history. While we don’t know the eventual extent of that outcome, this bill gives another layer of certainty in uncertain times. While the M. bovis outbreak provides immediate focus, the long-term overarching goal of this bill is to provide a more orderly mediation process. The halving of the milksolids price in the 2015 and 2016 seasons shows just how vulnerable we are to market volatility. The recent case—the cases of mis-selling of interest rate swap products—is also another case in point.

Dairy farm debt stands at $40.9 billion according to the Reserve Bank. DairyNZ’s 2016-17 economic survey puts the average farm-to-loan ratio at 49.4 percent. Term liabilities expressed as per kilogram of milksolids sits at 25 percent. Share milkers’ debt-to-asset ratio stood at 53.6 percent and term liabilities at $4.05 per kilogram. Sheep and beef farmers, according to Beef and Lamb’s mid-season update, have debt of $13.6 billion. Even horticulture has debt of $3.8 billion, and we recall the recent Psa outbreak that shows just how vulnerable they are, as well.

We also know that farmers are particularly vulnerable to mental health issues because of isolation. Last year saw a jump in the number of farmers that took their own lives, an increase to 22 from 18 the year before. Financial stress in pressured circumstances is potentially a significant trigger. There is real human cost as well as the financial cost in not putting mediation as a prerequisite before receivership.

This bill is not to bail people out for poor business decisions. We can, however, ensure the banks play fair, and we note the Australian ones are currently under the regulatory microscope across the Tasman. This bill provides some protection, helping to halt predatory and unsavoury lending, forced receiverships, and making money lenders accountable. I note with interest that Australia has recently enacted similar legislation.

As to the bill itself, clause 4 proposes a new Part 2 to the Receiverships Act. With “agricultural debt”, we mean debt from commercial farms, forests, plantations, orchards, vineyards, fisheries, as well as agriculture. The new Part 2 represents a cooling-down period, a pause, that could see creditors reach an accommodation over debt that can sometimes rush headlong into an emotional rush into receivership.

New section 44, inserted by clause 4, means that farmers are given notice that a creditor wishes to appoint a receiver. They have a right to nominate a mediator within 10 business days from a list of accredited persons drawn from the Arbitrators’ and Mediators’ Institute of New Zealand. The most appropriate administrator for this scheme is the Banking Ombudsman, given that all the main banks and their subsidiaries are members of this scheme, one that is funded by way of a levy. It is a good model, and the bill also enables new section 45 as a fair cost-recovery from any lender, whether they are a member of the scheme or not.

While the ombudsman scheme and codes that operate are good, there is an inadequate compensation cap of just $200,000. This is something Federated Farmers have highlighted and New Zealand First agrees with. That is why section 45 also removes the compensation cap, to make compensation open-ended, as it ought to be. This is important because, as the mis-selling of the interest rate credit swaps showed, financial loss is often much greater than $200,000.

As detailed in new section 46, lenders cannot nominate a mediator but must either accept or reject a mediator nominated by the farmer. Where creditors reject the farmer’s nominated mediator, there is a further process, but default resides with the Banking Ombudsman to appoint a mediator on the farmer’s behalf.

New section 47 of the bill makes it clear that the function of the mediator is to assist the farmer and creditor to arrive at an agreement for current arrangements and for future conduct of financial relations between them. Just doing this requires the lenders to ensure that they have dotted the i’s and crossed the t’s.

New section 48 requires that mediation sessions are conducted with little formality and technicality, and with as much expedition as possible. This is a positive development.

New section 49 reinforces the confidential nature of mediation, while new section 50 prohibits disclosure of information.

New section 51 is about ensuring that mediation is between the affected farmer and the creditors unless there is a compelling reason why an agent should speak for the farmer.

New section 52, importantly, protects the mediator from any liability, while new section 53 stipulates that the summary of mediation must be published to affected parties one business day after mediation. Only after 10 working days following a mediated summary of mediation can a receivership process commence.

As you can see, this bill is about correcting power imbalances that exist between creditors and individual farmers who are under deep financial stress. It, importantly, removes current compensation caps from the Banking Ombudsman scheme, proven by the Commerce Commission investigation into the mis-selling of the interest rate swaps. This bill conveys an important signal to rural New Zealand at a time of great uncertainty and also to the financial institutions. I hope that the whole House will see merit in this and support it through to the select committee, where we can make further changes if required. Thank you.

This bill most certainly needs a huge amount of attention from a select committee, because in its current state it will do very little of what the previous speaker, Mark Patterson, has claimed it might, and I want to explain why that is.

Firstly, we have supported it strongly to get to this stage in the House, and we’ll support it going to a select committee, and we’ll engage at that select committee to try and get a bill that is more reasonable for the House. But we make no commitments on the bill as it’s written. It may better be named as an amendment bill to the Receiverships Act 1993, because, in fact, all it does is put one step in front of the moment that the receivership is enacted, and at that point it is too late. If someone has got so far into debt, so far down the track of not being able to put together a solvent package that’s going to see them successfully farm their way out of their difficulties, it’s too late. So for the bill, while it does set out a proposal for how mediation might take place, a select committee will need to consider exactly where that moment might be triggered and how it might be triggered.

I was a little alarmed to hear about the cases that the member who just spoke previously raised—particularly his suggestion that there was a family caught by, effectively, mezzanine financing all their way through. That would tend to tell me that there was some advice that might have been taken earlier that might have helped them. I’m not being critical of that family. I understand the stress they’ll have gone through, but we can’t pretend that this bill is an answer to that sort of problem.

I think it’s also worth noting the big connection between the productivity of a farming property, the debt level on that property, and the equity that’s held in that property. And, when you hear the member, previously, talking about the $60 billion worth of agricultural debt in this country, that may not be the problem that the figure itself might suggest. If, in fact, that represents a reasonable percentage of the 100 percent equity in those farming properties and that equity is backed by a production percentage as well, then that’s just the sort of thing you would expect to happen in a dynamic and growing economy. It is not necessarily a problem.

People will choose to invest more and more in their farms, and if that proposition isn’t accepted, then look at somewhere like Marlborough, where, once upon a time, not so long ago, perhaps two decades ago—which might seem like a long time to some younger people in this House—you’d be lucky to get around about $30 an acre for sheep farming activities. But the huge investment that went into converting some of those properties from either sheep farms or, in many cases, orchards up to high-quality producing grape operations for the wine industry sees now the return per hectare thousands of times greater than was the case back then by any kind of adjusted measure that one might like to put on it.

So I don’t think it’s reasonable always to assume that the debt levels in agriculture represent the problem itself. The problem is where the productive capacity of a property falls below the cost of meeting the debt servicing or the capital returns on those properties. So I think there’s a whole lot for a select committee to dive into and consider. Further, I think it would be reasonable to say that it is not in the interest of any lending institution in New Zealand that we have a runaway problem with farm failures in this country. So the interest for the Bankers’ Association and for other banks to come along and to participate in that select committee process, I think, is quite high. Many of them, I’m sure, will tell good stories about how they do—and I don’t mean that in a derogatory way; factual stories—engage with the rural communities, do engage with agricultural producers, to ensure that they do have access to capital at the times that they need it and that they do have a clearer understanding of cash flow management in what is, effectively, no matter what the operation, a somewhat seasonal income picture for each of those properties.

I note that it’s always easy to point to the terrible cases that exist, but we shouldn’t also assume that if you’re not a very good farmer, then the huge amount of work that goes in by other farmers to meet their commitments, to manage their cash flows, and to organise their debt structures should be set aside for that individual on the basis that, somehow, mortgage payments can be optional. It’s, simply, not the reality or realistic for people to assume that. I think, in this effort to say—well, if a lending institution can see someone getting into trouble, early intervention and an acceptance by the party that is heading in that direction, of a process, is a good place for us to get to.

One of the triggers for us wanting to support this bill coming into the House a little sooner than might have been the case had it languished in the members’ ballot is that we do have the hugely challenging M. bovis activity that’s going on in New Zealand at the moment—hugely threatening to many, many farms. It will be interesting to see exactly how the Ministry for Primary Industries (MPI) eventually settle on how they should tackle it. There are farmers who’ve had to slaughter their stock. There are farmers who will have a limited amount of return on the slaughtered animals because of the stage at which they have to go to the works, and there is a process that’s being negotiated at the moment for some compensation in that area. What we were concerned about was there being nothing for farmers to turn to if they were dependent upon a financial plan on their property that meant that they, in a disrupted circumstance, fell into an even worse position than they might otherwise.

This bill does have a high degree of merit as a concept but not as a bill itself, and if anyone wants any convincing of that, they need only read the explanatory note’s first sentence, where it says, “… Debt Mediation as a mandatory step before the appointment of a receiver in respect of Agricultural Debt.” If it is simply a mandatory procedure, a mandatory step, then it’s just something they do or would do prior to calling in the receivers. It may in fact work to the disadvantage of some farming operations. But having a point clearly defined where a lender is obliged to speak to their lendee in order to protect the capital that ordinary New Zealanders have invested in the bank, by way of their savings or any other particular instrument they might like to use, is, I think, a reasonable thing.

We look forward to the discussions that we’ll pursue in the select committee. We’ll take full part in those, and our agricultural team will be very, very interested to see that we get the right sort of bill coming out of it. But we, as it stands, while voting for it to go to that select committee for that discussion, could not support it through a third reading as it’s currently structured, because the claims that are made for it cannot be delivered by this bill.

With those comments, I look forward to the rest of the debate and, hopefully, for a number of other parties in the House—well, there aren’t too many, are there; only one, the major one—to indicate that they too have an interest in ensuring that there is a good quality bill come out of this in the end. It may even be that the Minister of Agriculture stands up this afternoon in the House and indicates that the Government has an interest in taking it over as a Government bill so that there are appropriate officials from Treasury, perhaps from MPI and from the amorphous empire known as the Ministry of Business, Innovation and Employment, putting their stamp on it, providing the best of advice available in civil service to ensure that the engagement with the financial sector in New Zealand is positive and focused on the best outcome for farmers. You know, it’s too easy for us all to think, as city people, that farmers are just people who wander around the paddocks looking after their animals and nothing more. They are complex businesses these days, and the skills that are needed go well beyond just the physical skills that most of us would associate with farming. This bill could be something shaped into a serious support for their activity, which is very important for this country’s economy.

Just for the removal of doubt, I omitted to say earlier: “The question is, That the motion be agreed to.”

Thank you, Mr Assistant Speaker. I’ll take a short call to, firstly, acknowledge New Zealand First for their initiative. I think it was very good and very timely. Good things take time, like a good wine, a good cheese, and wisdom in the National Party, and I have to acknowledge the previous speaker, Mr Brownlee. I think he’s made some very fair points—that is, that this bill is a good attempt. It will need some adjustment, and the Government does support this both into select committee and at select committee. We haven’t had time to consider the extent of the changes and the level of support that we will give, but I think we have to admit—and you don’t have to be a rocket scientist to work out—there are pressures in the primary sector at the moment, coming up into winter, with things getting a bit colder. I was reminded of that more so in the South Island than the North. All of those little climatic changes and regional changes are felt very much by farmers up and down this country, and we can sit in Wellington here and sometimes forget that.

This bill is an attempt to, I guess, bring some balance to a relationship that is usually very productive across the primary sector—that is, that farmers need capital to, firstly, buy farms and then to operate them—but it’s a relationship that is not always in balance. The reality is that there has been a huge amount—and the speaker from New Zealand First, Mark Patterson, pointed to the level of debt: about $68 billion, or thereabouts, owed by farmers up and down this country. It’s not an insignificant amount of money. It’s not much less than the Government owes, and it’s dependent upon the hard work of families and corporations and other people to pay that money back eventually and, certainly, to be paying the interest on that on an annual basis.

From time to time, because of fluctuating markets, some people go broke. They simply can’t pay the bills, and the banks are forced to—don’t want to, necessarily—actually sell them up. At that point, then, the balance of power is not often always fair. I guess you’ve had, ultimately, the bank, with all the rights through contractual arrangements, basically demand that they get their money back, and, often, farmers and families having to walk away with not just nothing but actually with still huge debt owing to them.

Someone sent me a copy of a press article here from June 2013 where, indeed, myself—along with the assistant to Janette Walker, who’s done a lot of work in this area, and still does, putting forward a debt mediation bill that was, ultimately, blocked by the National Party at the time, who couldn’t see the value of it. I have to say that we’ve all moved on, and I acknowledge, as I say, the wisdom that’s emerged from us all—that is, that we need to ensure some fairness in a situation that will occur for too many farmers in the near to medium future. If they’re having to sell up, the reality is that there are more farms on the market now that we’ve probably seen for a very long time—probably since the 1980s. People are holding up for their estimated value on their asset, because they need that return when they sell to pay back the bank and to have something for themselves, and if the values were to drop and sales start to progress, then someone’s going to be losing something.

I have to say that the banks are currently looking at—and I had a couple of discussions on the weekend—this whole debt mediation proposal, and I have here a committee report from Queensland, where a select committee looked at the whole debt mediation situation and recommended a bill. There are pieces of legislation throughout Australia dealing with this issue, with different levels of success. In summary, the banks actually really like debt mediation, because it provides a fair process that protects both parties as they work through—not arbitration, but mediation. I think that over there in Australia, actually, the banks like it more than the farmers.

Look, on balance, of course there’ll be people who walk away who are not entirely satisfied. I think if we can bring in a regime here in New Zealand that does bring some balance to, I guess, a difficult solution—it always will be difficult—but one that is fair to both parties, then we will have achieved the outcome that New Zealand First is seeking with this piece of legislation and, I think, that all the House now seeks to have for the farming sector across New Zealand.

So, in summary, I thank the Opposition parties and New Zealand First. This is a timely piece of legislation. The Government’s committed to assist it through to a better conclusion. Kia ora.

I would like to acknowledge the mover of this bill and again reiterate that the National Party will be supporting this bill to select committee. I do think it’s really prudent to do something around fairness in situations, as the mover alluded to before, around farmers getting themselves into difficult situations and having to find a way through it. So I’m supportive of this, but, like the others, have actually queried the structure of this bill and look forward to Parliament having a discussion about it.

As the Minister just said, it’s easy to sit in Wellington and, you know, forget about things that go on out on farms, and I know that there’s a number of people in this House that don’t do that and that is across the House, because I’ve seen already a couple of you last weekend and I’m sure that both of—sorry, Mr Assistant Speaker. I’m sorry that the Minister and also the mover, when they were out at the dairy awards last week, heard a lot from farmers.

What really worries me about some of the conversations we’ve had around this bill was when the mover, Mr Patterson, talked about speed. He talked about the speed, and it seems to be about getting people through these processes and getting things done quickly and getting the reports out. My question is: at the moment, while we’re talking about M. bovis, which is completely dominating the discussions in the industry, how do you even introduce mediation financially when there is no certainty? That is the hard thing that I’m trying to get my head around at the moment, because when you’re dealing with a normal debt situation where perhaps there’s been a drought or there’s been a flood—or downturns actually have no certainty either, because the last downturn went on much longer and went much deeper than we thought it was going to go. We knew it was going to go deep, but there was a very, very long point in time when we couldn’t see the end of the tunnel. So it makes it very, very hard to mediate when there’s no certainty.

With this M. bovis thing, it’s even more difficult, because with the downturn there was always a light at the end of the tunnel. There was always going to be an upturn in prices, and people know that they can hold on for a period of time. But the uncertainty that we’re working through with M. bovis right at the moment—farmers are very fearful out there. They don’t know where it is. They don’t know how far it’s gone. They don’t know how it’s got into the country. They don’t know what the cause of it is. Some of them know that it’s potentially on their farm. Some of them know that it is on their farm, and some of them don’t know when it’s going to come to their farm, don’t know when it’s going to be eradicated. So a lot of the questions we’re getting from farmers at the moment are around certainty and asking the Ministry for Primary Industries to give some certainty, because I’m sure they would be quite happy to sit down and have some mediation around this process, but you have to have a point of starting a negotiation around that sort of stuff.

Often, as it was talked about before, the debt is too high for the productive capacity on the farm, and that is what we look at when we look at droughts and floods and those sorts of things in those adverse circumstances. But I worry, going forward—and I’m sure we’re going to have a lot of discussions around this as we go through the select committee process on this bill—about the glut of farms for sale. I think the point is that it’s been a very hard few years, but if we can’t supply farmers with certainty—and this whole M. bovis thing, I’m already hearing people say, “Look, I’m just going to sell up my herd and I’m going to move on because I’m not sure, long term. I want to be prudent now and I want to make that decision.” We’ve only got to get a few people starting to do that and we’re going to get some real big uncertainty about land prices if we don’t get into a situation where we have some certainty around this.

So, yes, I support the concept of the bill, as I said before—but not the actual make-up of the bill—but one thing I will call for while I’m making this speech is to call again for the Ministry for Primary Industries to be really prudent and try and be as speedy as they can to give some certainty to farmers so that at least farmers then know what they’re dealing with, and if they do have to mediate or negotiate, or whatever their decision is, then they have the facts on the table to be doing this. I know it’s a difficult time, but some certainty would be really, really helpful right now. So thank you, Mr Assistant Speaker, for the opportunity.

Kia ora, Mr Assistant Speaker. Ngā mihi nui ki a koutou. Kia ora. My heart goes out to farmers facing Mycoplasma bovis at the moment. You read the stories in the newspapers and see it on the telly—the pain and the hurt when you see your animals, which you’ve raised from birth, unfortunately having to be slaughtered because of this biosecurity crisis. My heart goes out to them.

What we also know is that bankruptcy and receivership on farms occur because of results like this, and M. bovis absolutely puts it front and centre in our national discourse, but it’s also the effects of droughts, which we heard the last speaker, Barbara Kuriger, speak about. We know this is simply going to get worse as climate change takes more of a toll on us. What the Green Party wants to see is those family farmers stay on their farms.

Now, previously there’s been a big debate on the role of debt mediation and if there’s a special case for the agricultural sector. Because of the intergenerational nature of farms in New Zealand, as it is around many other countries in the world, I think it is a special case. We do want to make sure these family farmers can stay on the farms that their parents and their grandparents and, in some cases, multiple generations further have farmed.

So I want to acknowledge the New Zealand First Party. I guess this really shows the case for persistence. I understand this was first put to Parliament back in 1999, and here we are again. It’s a very persistent push from the New Zealand First Party. We acknowledge that. It’s not the traditional way that members’ bills get in front of this Parliament, but it’s good to have unanimous support of all parties in Parliament.

Look, it’s a debate that we’ve debated repeatedly from Doug Woolerton’s original bill through to Ian McKelvie, who tried to introduce similar legislation back in 2012. The issues have always been vexed around the costs of compliance, whether it’s needed—arguments being put that banks have an interest in not seeing their customers go bankrupt, which we understand. But, look, it’s important that we do have this debate around the select committee table. We urge people to make sure they participate, because what this Parliament is trying to do is redress the power imbalance between banks and farmers. When you’ve got $54 billion outstanding in the agricultural sector in 2015—was the advice New Zealand First has put forward—it’s a huge amount of money. What we want to make sure is that the power balance is appropriate to encourage innovation, encourage entrepreneurialism, but also encourage good capital investments.

We know it works overseas. Looking and researching for this debate—it appears to work successfully in Australia, in Canada, and in other countries. I understand from New South Wales research that Queensland farmers were benefiting, with 75 percent of cases in mediation resulting in settlement, which is very good.

The key thing I think for us, when you take it back to that intergenerational ownership of many farms, is that we do want to support those family farmers. A criticism I often hear is that you see a lot of Queen Street farmers in New Zealand, and there’s a different farming model and a different approach. Now, I was quite fortunate to be visiting farms in the Hawke’s Bay on the weekend, and, look, there’s some fantastic farms doing fantastic work in New Zealand; I mean in an environmental sense, and in a sustainability sense, we’re seeing some amazing leadership from the sector.

Now, I genuinely believe farmers when they say that because of the intergenerational nature, because of their close connection with the land, they are true environmentalists. I genuinely believe it. But I also believe there can be a difference when you’ve got a farm being run out of Queen Street or a corporate-run outfit versus a farmer who’s literally getting his hands dirty and wants to pass it on to the next generation—his children. So we see this bill as a step in that direction, to make sure that we can keep those farms being handed down the generations to their kids. We genuinely believe there will also be positive sustainability benefits as an outcome.

So, we congratulate New Zealand First for putting this legislation to Parliament. We look forward to hearing the debate around the select committee table, and we think it’s a very reasonable, prudent approach.

Thank you, Mr Assistant Speaker. This is an interesting bill, because generally you wouldn’t expect farmers to be treated any differently from any other business. If someone borrows a lot of money and then gets into trouble, well, then what about other businesses in the community and why aren’t we advocating for them as well? There is a certain aspect of that, and New Zealand is a very high agricultural and horticultural producing country, and there is high debt. But that’s a result of the business approach—you know, New Zealand farmers have been very efficient in being able to cover that debt in the past. It’s not so much about drought or even biosecurity issues like M. bovis that will actually cause this issue. It’s more around a high amount of debt that a farm may have, their profitability being reduced by reduced prices from overseas. Actually, the biggest issue would be interest rates. You see Argentina just hitting 40 percent interest rates today; that happens if you have got a very poorly run economy. For farmers, the best thing you can do is actually have a stable economic base that actually enables them to make the investment decisions like anybody else.

But this bill does have an area of interest that this Parliament wishes to see pursued through to select committee, and it’ll be interesting to see the submissions there. And some very strong points have been raised by people like the Hon Gerry Brownlee—that if you are in receivership it might be too late at that point. There is also the point that my colleague Barbara Kuriger made around the need for certainty and support, and that if there are going to be Government responses to issues, farmers need to know those responses are timely and they are important.

There also have been a number of farms for sale in regions like the Waikato, and that has shown a change in the land price. I think you’re seeing that they are selling, but at different land prices dependent on location and profitability. So I think farmers generally are very efficient in that regard. Many have multiple bank lending arrangements, so they do play off banks against each other, and so they’re not sometimes as innocent in that as they may wish to be seen.

But we need to actually look at the fundamentals that drive an economy that actually enable farmers to succeed, and although New Zealand First has brought this bill towards this Parliament, and I appreciate that, you know, when you support a Government that is against international trade; is against overseas investment; is going to put interest rates up by poor Government spending, as we’ll see tomorrow; is going to bring in new taxes on farmers from capital gains taxes to higher income taxes; hasn’t supported farmers and the labour relations reforms that you’re going to see come through; hasn’t supported farmers and the Dairy Industry Restructuring Act reforms; seeks to bring agriculture into the emissions trading scheme—all those factors together, if you put all those Government policies that New Zealand First is supporting in with higher interest rates that will come, and then, potentially, if there were a drop in income for farmers, then that is a mix where farmers really do have a disaster. That is the problem that farmers face going forward: poor economic management coming out of this House. And if we really want to support farmers, we have strong economic management here and don’t make those silly decisions that the Ardern-Peters Government wishes to make.

This is a bill that will progress to select committee, and there will be submissions on it. I believe there will be submissions from other sectors in our community that wish to have the same opportunity for mediation at a stage in their business, and that’s something for which there is going to have to be a reasonable reason given, in terms of why farmers should be treated differently from others. But with the nature of the agriculture industry and the huge role it plays in the New Zealand economy, how it is split into a number of smaller businesses that actually work together through a co-operative structure, there may be cause for having a good look at this and seeing what opportunities there are to provide that kind of incentive or structure for farmers and, potentially, for other businesses as well. Thank you, Mr Assistant Speaker.

Kia ora, Mr Assistant Speaker. I’m pleased to add my contribution to the first reading of this bill. Just in reference to Mr Bennett’s speech, for the first three minutes I was actually very much in agreement with Mr Bennett, but then he completely lost the plot for the last few minutes of that contribution. But I’m here to talk to this bill, and can I commend Mr Patterson for bringing this bill to the House. Certainly, we are generally in agreement that we support the intent of this bill, but it does need a lot of work and I’m sure that there will be many submissions made. I certainly hope so, particularly from the farming sector, farming groups, but also the banking industry as well.

You know, it’s a fact of life that some businesses can get into difficulty and have trouble paying back the money that they’ve borrowed, I guess. But, you know, the function that banks play is actually vital to our economy and in ensuring that our whole national economy runs. But what this bill is doing, I guess, is it’s adding a step prior to the appointment of a receiver or the potential appointment of a receiver. I think we mustn’t forget that every secured creditor, every bank under their security agreements, has the right to appoint a receiver at some point. What we’re doing with this bill is adding a step prior whereby there is a mediation that takes place. So I commend that.

Certainly, one would hope that as a result of that mediation a pathway forward can be found whereby a bank does not appoint a receiver, but, inevitably, I guess, it is the right of a secured creditor to do that. And I think what is lacking from the bill at the moment is—you know, is this merely a step which can prevent the inevitable? It’s not quite clear. Sure, there might be a compulsory mediation step but, again, that may provide no comfort to the farmer concerned and it may just delay the inevitable. This bill may provide some comfort for the farming sector—that at least they can engage in those discussions—but again, ultimately, it can’t remove the right of a secured creditor to appoint a receiver, and I think that needs to be teased out some more in terms of the work that the select committee conducts on this bill.

There are just a few other remarks I’d like to make in my remaining time. I guess the bill is talking about farm debt, but I’m just interested in the scope because I know Mr Patterson mentioned fisheries—I think he mentioned fisheries—along the line, but equally this bill could be applied to other primary sector industries such as aquaculture as well. It’s farming that’s done in the marine environment, but, again, they all borrow money and they all have to deal with banks.

So, again, the scope of this bill could extend beyond just simply agricultural borrowers. Who pays? And I know that the bill mentions that the Banking Ombudsman will pay, but, ultimately, the costs will be borne somewhere along the line by the borrower, and so we have to think of the merits of going through this additional process. Is it merely delaying the inevitable, or can it, ultimately, come to a better outcome—and that’s what we would like to see. So maybe these provisions could be beefed up.

So there are a lot of issues that need to be teased out. But I support the intent of this bill and I certainly hope—and I’m sure—that the select committee will give it a thorough examination. Thank you.

Thank you, Mr Assistant Speaker, and kia ora to the last speaker, Rino Tirikatene, who made some excellent points in his very good speech. I think he’s quite right. I think that the scope of the bill as it stands at the moment does cover other industries like forestry, and I thought he did say aquaculture, but I might stand to be corrected in that; it certainly was covering fishing. Look, you know, we are supporting this bill to the select committee and I think that’s a great place. Points have been made not only by the previous speaker but also by the Hon Gerry Brownlee earlier on in this debate. I do question why it’s being sent to the Economic Development, Science and Innovation Committee when, in my own personal view, it would have been better suited to the Primary Production Committee or perhaps the Finance and Expenditure Committee. However, that’s probably a minor issue.

But, you know, the point’s been made a lot about the size of agricultural debt or the quantum of agricultural debt. Mark Patterson, the bill’s promoter, made the point that from 2015, debt has grown from $54 billion to over $60 billion, and that’s a large number. I think it’s very difficult for anyone to imagine how much money that is. But my understanding is—certainly, in the dairy sector—that the largest part of the debt is held by a few, rather than it being evenly spread across the industry, and that really speaks to the fact that some in the dairy industry have quite a sort of corporate approach to dairying and have gone quite large.

I think one of the things we also have to remember is that it’s not just people that fuel growth and drive innovation in any sector—and particularly in the agricultural sector—but it’s actually debt. Farmers are risking their capital, but in order to maximise the benefit of that, they borrow some money against it, thereby leveraging their own equity.

That has driven—as the Hon Gerry Brownlee said—in my patch a massive change from what was dryland sheep farming to a very highly profitable vineyard operation, which has created a huge boon to the economy, not just to the farmers who became grape growers but also to the people living in Blenheim and the surrounding areas. The population has had to grow exponentially to actually supply the people to work in that. And it’s not just people working in the vineyards. We have people working in laboratories, we have winemakers—all of those associated industries that go around that—and it’s not unique to the wine industry. We’ve seen that replicated with kiwifruit, with the apple industry, and also with the hop industry. All of those industries are growing, and that is fuelled by debt.

Mycoplasma bovis, of course, is top of mind at the moment for most of us, and we really do feel for the farmers affected by that. This bill will, I think, send a bit of a message to those in the banking sector that we are watching them and that they really do need to back up their clients.

I do share the concerns that the Hon Gerry Brownlee and Rino Tirikatene raised around the timing of this, and obviously these things can be sorted out in the select committee. But in my own experience of dealing with a downturn in the wine industry, and with people in trouble with the banks, if you wait until the stage where the banks really get anxious and bring in a mediator at that stage, you’re only delaying the day when they’re going to have to probably leave anyway. It’s better to get in earlier.

How you structure that in a bill—I don’t have the answer to that. But I would hope that the select committee are able to tease that out, because getting that cooling-off period which is in the bill is great, and to have that mediation, where people can get around the table and sort out a plan to move forward, really needs to happen before we’re sorting out how to get in the lifeboat, because by then, a cooling-off period is only decreasing their equity with every hour that goes on because of the increase in the interest bill that’s building up.

So the intent of the bill is great. I support it. I think it’s fantastic. I do question the select committee that it’s being sent to. However, I’m sure that the bill’s promoter will ensure that there is really good support around that, and that the right questions get asked. I really urge all the rest of the House—I’m sure everyone supports it—to ensure that they get good submitters in, to highlight the areas that really do need to be sorted out in the bill. So, with that, I commend it to the House.

Thank you very much, Mr Assistant Speaker. It’s great to see that all parties in this House have stood up to speak in favour of what is a very important issue—the issue, of course, of debt mediation when farms and livelihoods and families’ connections to productive land are under threat. I stand here a little bit uneasy. I’ve never agreed with National Party MPs so often as I have today, but it is good to see. [Interruption] The point is—in fact, I haven’t agreed with so many National Party MPs since the day that nearly half the caucus said that Amy Adams should have been leader instead of Simon Bridges.

But the point here is that speaker after speaker has highlighted the importance of agriculture to this economy. In fact, I want to acknowledge one member, who I don’t believe I’ve ever agreed with previously—David Bennett, the member from Hamilton East—who posed a pretty careful question and one that we want to consider at the select committee stage. It was: why should farmers be treated differently to any other business people? I think the answer is quite clear. It is that agriculture has such a special place in New Zealand. It contributes significantly to the economy directly, but then also influences other contributors to our economy such as tourism.

New Zealand is graced with many beautiful places in this country, but the role that farming has played in terms of broadcasting what this country is about to the world cannot be overlooked. So when you have an industry that contributes so much to this country, and yet is actually, in many respects, in such precarious positions given its reliance on commodity prices, the boom and bust nature of agriculture, and the significant impact to our economy if a drop in commodity prices was to affect the industry given its high level of debt, I believe it’s only right that this House investigates how we might be able to impose some level of mediation at some point in that process to preserve families’ connections to their farms.

The Mycoplasma bovis scare at the moment makes this bill quite timely. There is tremendous uncertainty amongst agricultural communities, rural communities, and the primary industries in this country as a result of an unprecedented breach of biosecurity in this country. Such is the nature of Mycoplasma bovis that it is difficult to contain and difficult to trace, and I personally have every faith that the Ministry for Primary Industries is doing what the good member from Taranaki - King Country has called for. They’re being prudent and they are being as fast as they can, but the nature of this disease means that it is difficult. It is not like mad cow disease and it is not like foot-and-mouth, because it is not immediately identifiable on the animal. The point here is that it is creating uncertainty, and that anxiety amongst our communities—it is unknown when that will rest.

So in that sense, and in the broad essence of the importance of agriculture in our economy, it is important, I think, that we support this bill through to select committee, and then we can have a discussion. We can have a discussion across the House as to the best way in which we can do something in this area. There are some issues with the bill as it is currently written, but I am confident—as are previous speakers on this bill—that once we get it to select committee stage, we can actually look at improving it. Indeed, that is what that stage is about.

I must say, as a new member in this House, that I am quite pleased about the number of occasions that both sides of this House do work together on particular issues, and given my background and my particular interests, I want it known on the record that I am very pleased to see that many of those instances are around issues affecting, or potentially affecting, our rural communities. This bill is important. It is timely. It identifies an issue that this House should take seriously, and from my perspective and, I think, from the perspective of the Labour Party, it is heartening not only to see New Zealand First put it forward but to see every single party in this House support it.

We support this bill through to the select committee stage. It’s a bit like life: life’s never perfect, nor is this bill. But we’re voting it through to the select committee because we’re hearing that with the spread of M. bovis, some payments are taking their time to come through and some banks are putting pressure on farmers.

Banks are an interesting one. We can’t live without them, and sometimes we wish we could. With banks, for farmers and for businesses to grow and to ensure future generations stay on the land, we need capital, and the reason why banks provide the lowest cost of capital is because they have information on us. So if we didn’t have the banks, I would have to come up to you, Andrew Falloon, and say, “I’d like to borrow some money.” You don’t know too much info about me. Therefore, the interest rate would have to be a lot higher.

I think another important aspect of putting this through to the select committee stage is the fact that we will hear from the banks. I’d better acknowledge Rino, a previous speaker for the Labour Party. He made a really good point: we don’t want to impose additional costs on to farmers, additional red tape, so it will be good to hear from the banks to get their thinking around this, because at the end of the day we don’t want interest rates to go up, which would cost farmers a lot more. I do want to acknowledge the banks in Southland dealing with a lot of farmers affected by M. bovis at the moment. The feedback is banks are working with them well in Southland. It’s not so true in areas like South Canterbury and North Otago. There are four or five farmers that are really, really struggling up there with M. bovis, and the banks are putting pressure on them, so it’s very timely that this bill’s come up.

I was speaking to one farmer this morning, talking about this member’s bill lodged by New Zealand First member Darroch Ball, and I acknowledge Darroch, and also, Mark, your contribution earlier. It’s great to have you in the electorate, as well. But when I was talking to this farmer, I was sort of describing and outlining the bill to him, and he was talking about his experience of the bank that he’s been dealing with for about 25, 30 years. He had a second bank come in just for a chat, just to review his banking facilities and his lending, and one point that bank made was, “Well, we do feel you have been under a bit of undue pressure here from your bank.” So he did mention that this bill would be a good idea, and just having an independent voice will help. Farmers, especially when they first buy farms, are under a huge amount of debt for the first 10 to 15 years. A lot of that is because of the good work that they’ve been doing for their environment. They’ve been investing in riparian planting, effluent systems, fencing—97 percent of farms are now fenced, which is the equivalent of, I think, from Wellington to Chicago and back. So quite often the reason why farmers do take on additional debt is the upgrades they have been making.

I just want to highlight a couple of areas of concern around new section 49 and new section 50, inserted by clause 4. It’s around the confidentiality of mediation sessions and disclosure of information. It’s all very well in theory having these sorts of strict rules about disclosure and who’s going to find out about it, but my experience with M. bovis is that if a farmer does have M. bovis at the moment, they’re protected by law, to basically protect them and to ensure farmers come out at the first possible opportunity. All it takes in a small rural community is one, possibly two, phone calls, and it’s pretty easy to pick up gossip. So those are three clauses I’d like to work through at the select committee stage.

Just my last comment is it’s great, I think, that nearly every person on the Primary Production Committee has risen and spoken to the bill. I’m not too sure why this is going to the Economic Development, Science and Innovation Committee. It would be great if it could come through the Primary Production Committee. I am a new member, so I’m not too sure of the procedures, so that’s my last remark. Just quickly, I just want to acknowledge all the farmers in Southland, who have had a pretty tough few months with the droughts and with M. bovis, and just one wish for me is: how about we take the political crap out of M. bovis? Let’s get on with it, let’s give these farmers a chance, and let’s get this country going, especially for farmers.

Mark Patterson—5 minutes in response.

on behalf of Darroch Ball (NZ First): Mr Assistant Speaker, thank you. Look, can I start by thanking everyone that has contributed to this debate for the constructive nature of that—you know, the criticism and feedback—and for the positive intent, recognising the underlying issue and being prepared to back this through to the select committee so that we can iron out any wrinkles that we may have identified.

I just would like to pick up on the last comment by Hamish Walker. It was one that I was going to lead off with myself, and it was actually one that was brought up to me on the weekend by Barbara Kuriger in a discussion about taking the politics out of this M. bovis situation. This has been a major biosecurity breach. There has been a failing of the National Animal Identification and Tracking system. There have been some elements of our response through the Ministry for Primary Industries that haven’t been as good as we would like, under pressure in real time. But I don’t think it does us any credit, actually, as a Parliament to be squabbling and bickering over that at this time. Those farmers, as those previous members know, are under huge pressure. They are looking to us for leadership, not for political point-scoring. We will do the background, we will do the research and learn the lessons, but now is not the time, I think, to be having this debate.

Just a couple of issues—I would like to make a reflection on some of the points that have been made. In terms of this being sort of almost at the ambulance at the bottom of the cliff stage, I think there’s a pre-emptive nature to this. Just the fact that there is this debt mediation mechanism that will be there actually puts some onus on the banks or the lenders, at the start of that process, to make sure that they’re absolutely doing the right thing. Farmers often have a lot of equity that banks can see as an easy target to get money out there, to get it earning interest for them and their shareholders, and I think it is just a wee check and balance on them—that this may come back, and that in the cold, hard light of day, when they’re under genuine scrutiny from people that actually understand these things, if there are practices that aren’t appropriate, they will be exposed.

The other side of things is it, actually, gives the opportunity for an honourable exit. In the case I made of the family that had been on their farm for 150 years, they ended up—I won’t even recount it in the House. It was in horrific circumstances, with the bailiffs turning up. What has been, as I’ve gotten into this and gotten into the case studies, is there is this secondary tier of lenders that are out there. They are genuinely predatory, in my view. There may be a place for them, but there needs to be some more oversight over them, and I think that this bill may prevent people going to that step out of desperation. It might be just that circuit-breaker for them to take a step back and not make another bad decision on the way to those bailiffs turning up and sending them out the door with nothing more than a second-hand car and the clothes on their back.

This is not all about saving the farm and exonerating business risk. It’s totally not about that. This is about putting in another layer, adding some dignity, and just putting another mechanism in place that can add some comfort and some peace of mind. I note the level of debt—there was a little bit of a dispute about that on the Opposition benches. The Reserve Bank makes it very clear that the level of farm debt is of concern to New Zealand’s financial stability. The fact that Australia has brought in this legislation—they’re a country that faces a very similar situation, and they have a large agriculture sector, as well, that is open to a lot of climatic risk, commodity risk. They have seen fit to put this legislation in place. Often, the same banks are at play, so I can’t see why we would not provide the same level of protection for our farmers as the Australians have done for theirs. Agriculture is part of that, as are forestry, fisheries, orchards—a whole lot. It’s not just pasture agriculture.

To the point about the select committee—as a new member, I’m taking advice on that, but that’s where it sits at the moment. But thank you to the House for your support with this bill. Thank you.

Bill read a first time.

Bill referred to the Economic Development, Science and Innovation Committee.