Farm Debt Mediation Bill (No 2)

on behalf of the Minister of Agriculture: I move, That the Farm Debt Mediation Bill (No 2) be now read a first time. I nominate the Primary Production Committee to consider the bill, and that it be reported back to the House by 4 November.

This is a significant bill for farmers across New Zealand, for their families, and for our rural communities. Farming is a vital part of New Zealand’s economy, national identity, and rural communities. Farming is a major contributor to our economy, delivering more than $45.7 billion in export revenue last year. What’s more, farmers are often the lifeblood of rural communities, providing rewarding careers to the approximately 350,000 people employed in the sector. Farmers are entrusted as the stewards of New Zealand’s economy and environment. Farmers face many risks outside of their control, including climate change, biosecurity threats, and global trading conditions affecting market prices.

Farm businesses also carry significant levels of debt, which has been increasing steadily in recent decades. As at March 2019, $62.8 billion of farm debt was owed to New Zealand banks, up from $17 billion in March of 1999. That’s an increase of 270 percent over 20 years. The Government is committed to supporting the primary sector in a just transition to an environmentally, socially, and financially sustainable future. The Farm Debt Mediation Bill (No 2) also represents the outcome of the examination of agricultural debt mediation as well as receivership fees charged, as agreed to by the Labour - New Zealand First coalition Government agreement for the 52nd Parliament.

I’d like at this time to thank New Zealand First for their efforts in promoting this bill. The Farm Debt Mediation Bill (No 2) is an important component of the Government’s support for farmers. It’ll help mitigate some of the key barriers that farmers and creditors face to effectively negotiating mutually beneficial debt arrangement. The scheme supports farmers involved in agriculture, including sharemilking, horticulture, aquaculture, or any activity involving primary production carried out in connection with these. As such, farm debt refers to financial arrangements secured against farmland, including buildings, farm machinery, livestock, and harvested crops and wool.

The bill applies to all secured creditors—both banks and secondary lenders—and has broad support from all major New Zealand banks. It has been created through a well-informed process, taking into account a wide range of stakeholder views and lessons learnt from international experiences, like the New South Wales farm debt mediation scheme.

The Farm Debt Mediation Bill (No 2) will provide for fair, equitable, and timely resolution of farm debt issues with two key objectives: first, for farmers and secured creditors to meet in an equitable manner to constructively and objectively explore options for business turn-around and, second, to provide for a timely and dignified exit for those where few other options exist. The Farm Debt Mediation Bill (No 2) will require secured creditors to offer mediation before taking any enforcement action in relation to debt held over eligible farm businesses. It will also allow for farmers to initiate mediation with a secured creditor without any statutory restriction other than having a debt secured over an eligible farm business.

The balance of power between the parties in lending situations is often skewed. The bill will provide a structured and consistent process for resolving farm debt problems that both farmers and creditors can have confidence in. Mediation is seen by farmers and lenders alike as an effective means of addressing the power imbalance between farm debtors and lenders. This process will be supported by independent and expert mediators with a strong understanding and experience of the rural sector. A neutral and independent mediator will support both parties to understand and have trust and confidence in the process. The bill establishes a standard mediation process of 60 working days. During the mediation period, there is a prohibition on enforcement actions related to that debt.

The bill recognises the diversity of farmers, lenders, and farm debt, and the importance of getting the right person to mediate. Under the scheme, farmers and lenders have combined input into the selection of a mediator, with farmers making an initial recommendation of three mediators, which creditors then can select from. Stakeholders from across all sectors have recognised the importance of having independent and highly skilled mediators.

The bill provides for an approved mediator model, based on the family dispute resolution mediation model. This allows for mediation organisations to apply to the administering ministry to approve a mediator organisation if they meet certain terms and conditions. Approved mediator organisations will be responsible for authorising and monitoring the performance of farm debt mediators, in line with the standards set by the administering agency.

The model provides a light-touch, low-cost model for accrediting mediators, with an effective approach to ensuring high standards of expertise and subject matter understanding. It also provides for flexibility in the farm debt mediator market. This is key to ensuring the market can grow alongside the demand and keep costs to a minimum. Mediation is a real opportunity to discuss and develop mutually beneficial outcomes. We know that the earlier farmers and creditors have discussions, the better the outcomes are for both parties. For this reason, the bill places no statutory restrictions on farmers accessing farm debt mediation, other than having debt secured over an eligible farm business. We will work with farmers, industry bodies, and rural professionals to ensure that the scheme is well promoted and understood.

Farms are often much more than a business. They are the centre point for a family and for a community. While the bill is focused on facilitating discussions about farm debt, the benefits are much wider and include mitigating the toxic stress on families facing farm debt and supporting the involvement of wider family, hapū, and iwi. Acknowledging and supporting the mental health crisis and the mental health impacts that contribute to and are associated with farm debt will also be addressed. Providing support, better animal welfare and environmental outcomes, and creating opportunities to improve business and farm practice before they hit crisis point, as well as being accessible for financially struggling farmers, the system has a light touch administratively, allowing it to be implemented with minimal impact on the running lender’s current business models, reflective of the overarching goal of the suite of initiatives to support the primary sectors into just transition.

The Ministry for Primary Industries (MPI) will administer the scheme. Day-to-day responsibilities are cohesive with MPI’s focus on and network with rural communities and support for farmers. Officials from MPI, the Ministry of Business, Innovation and Employment, and Te Puni Kōkiri have worked together to ensure that the approach incorporating tikanga is consistent across farm debt mediation and the proposed introduction of dispute resolution in the Māori Land Court. The mediation process has been designed to allow for tikanga principles to be incorporated where parties consider it appropriate, acknowledging that tikanga differs across iwi and across regions.

To genuinely incorporate Te Ao Māori, parties must be at the centre of determining the “what” and “how” of tikanga in their mediation process. The bill acknowledges that farm debt is a complex issue, taking into account a variety of stakeholders with different levels of understanding of financial issues and differing views and values. The complexity of farm debt has not been undervalued in the creation of this bill, and provisions to monitor the system have been taken into account.

The farming sector remains vital to New Zealand’s growth and wellbeing, and it is in New Zealand’s best interests that farming businesses are supported in the economy’s transition to a sustainable, inclusive, and productive future. This bill provides an opportunity to level the playing field for farmers and to provide equitable resolution of debt that will benefit farmers, lenders, rural communities, and all New Zealanders for generations to come. I support this bill to the House.

Thank you very much, Madam Speaker. It’s a wonderful opportunity to discuss the Farm Debt Mediation Bill (No 2). The first question for the Government is: why is this bill the second bill? What happened to the first bill?

💬 Hon David Bennett: Yeah, where’s Darroch?

We should traverse that. Yes, Darroch Ball stood up and baited this side of the House when we were raising concerns about banks circling farmers as a result of the response to do with Mycoplasma bovis. We were hearing that farmers were under pressure from banks, so we agreed to support the New Zealand First bill, which had been around since 1999. Yet when we discovered the bill in the select committee, officials came in and said, “Pretty much it’s like an old mangy dog.” and it needed to be put down. It was unworkable.

So there’s New Zealand First, had a bill since 1999—the old mangy dog bill. It comes into the select committee; senior officials come in and say it’s unworkable. That’s why we find ourselves in this position now, with this second farm debt mediation bill in front of the Parliament. I felt that that was a real embarrassment. Officials came in and said, pretty much, the select committee—the Primary Production Committee—couldn’t panel-beat the bill well enough to get it in a shape so it could come back into the House, so it needed to be discharged. So, while we will hear speeches this afternoon from New Zealand First saying it’s their idea, if they’d done their homework way back in 1999, this bill could indeed have been law by now. But now we are faced with the facts of this bill.

When I read this bill, I think it’s a hell of a lot better than the mangy dog one. This is basically the New South Wales model cut and pasted and inserted into a Government bill. Indeed, the National Party have decided to support it, but we want to interrogate it through the select committee process. We have got a lot of questions. How can we be convinced that it’s only going to cost $6,000 to go through this mediation process, cut fifty-fifty between the banker and the farmer? We want to be convinced in the select committee that costs aren’t going to run away on our hard-working farmers going through this process.

I’m also led to believe that the Ministry for Primary Industries (MPI) think that they have the wherewithal to be able to administer this scheme. Why on earth would MPI want to be getting involved in something with the banks? You would’ve thought that Treasury would be the logical place to provide the advice and oversee this and run the bill. The other question that we will have to interrogate in the select committee is: what is the real definition of a farm? So, yes, we will support it through the first reading, but we will need to be convinced in the select committee that we can make the changes that we believe are necessary to give us some certainty going forward.

Also what has been mentioned by the previous speaker, Jenny Salesa, is the size and the quantum of farm debt. It is now about $63 billion, and about $42 billion of that is held in the New Zealand dairy industry. For people listening or watching Parliament this afternoon, they’ll think, “Well, that’s a horrendously big number.”—and yes, it is a large number. It’s not as big as the national household debt, but yes, it is a large number. What I want to say is that that’s because of the positivity that farmers and growers have in the primary sector of New Zealand. They have, basically, gone and borrowed to expand their business, to purchase the property next door to lift their overall performance, whether it’s through fertility, lifting their animal genetics, or whether it’s development, more water reticulation, doing the right thing for the environment, fencing off and excluding stock from waterways. It’s not acknowledged anywhere on that side of the House that farmers, over the last five years, have invested about a billion dollars in enhancing and improving the environment, fencing off the distance from Wellington to Chicago and back again. A lot of riparian planting is already under way.

So, yes, this debt number is large, but we shouldn’t forget that that has helped to underpin and grow the overall New Zealand economy. But right now we see ourselves in a different situation, having just come off the large Fieldays event—120,000 people coming through those gates over four days, the largest in the Southern Hemisphere. Those farmers that I spoke to up there, when they look out and they see the returns being quite profitable and healthy for the sectors, they are concerned about sentiment. A lot of that sentiment is coming from the worry of this Government. We have the billion trees programme, which is now causing some issues out there in rural New Zealand. No one wants to see a sea of trees and rural communities hollowed out, because, if that occurs, that will put more pressure on banks and indeed may mean that this Farm Debt Mediation Bill is needed.

Also what’s occurring out there right now is a real issue with the Reserve Bank and whether they decide to make changes with the capital that individual banks need to hold, therefore forcing more pressure on to farmers, who have a larger amount of debt than most. If the Reserve Bank make the changes that they are talking about, it’s likely to cost the farmers with the most debt 25c to 30c a kilogram of milk solids. That is a massive cost off the bottom line. So right now, farmers are concerned about that.

They are also mindful of the fact even though they’ve done all of those things that I outlined before, enhancing the environment, they know that this Government wants to do more in terms of freshwater regulations. And if this Government goes hard on the primary sector, it will indeed drive up more costs. And what will farmers do if they have more costs and more taxes like fuel taxes imposed on them? They will turn to the bank and likely say, “We need more money.”—so therefore more debt. So those are the things that are playing out in rural New Zealand right now. The other one that is significant is this horrendously high and unrealistic methane target. And there’s a hell of a long way to play out in the select committee.

In conclusion, I also want to talk about dairy land sale prices being back, and it depends on who you refer to, but it’s in the vicinity of 10 to 20 percent in the last 12 months. We know that banks are being tougher, and this bill may indeed be necessary and give farmers a little bit of comfort that there is a mediation process between them and the banks. My advice to farmers is: if you get to this point where mediation is necessary, you’ve gone too far. Farmers need to be very mindful of the fact that they need to seek professional advice and not get in this situation. It’s very hard to determine the number of mortgagee sales in New Zealand. No one will really tell you, because they tend to be bad in terms of reputational damage for the banks. So they are tending to be managed exits out of the industry. But I am hearing and getting more and more concerned about those numbers increasing.

So I say to the House this afternoon that the National Party will support this bill through the first reading, but we have some concerns, and I’ve outlined those this afternoon, and we will use the select committee process to interrogate those concerns to make sure that this bill is not like the first mangy dog bill from New Zealand First that had to be put down, but that it is actually going to be workable and it’s going to be practical and make a difference for our farmers.

Well, what an interesting contribution from the member that just spoke then, Nathan Guy. I actually got quite an insight into where the National Party’s view towards the regions and to farmers is right now, because I tried to follow it—and I was studiously trying to take notes just to make sure that I could follow the logic of the Hon Nathan Guy—but it was an incredibly distracted and defensive contribution with regards to farmers, and I ask myself why Mr Guy would be so defensive about a bill and about a measure that is targeted to ensure that the wellbeing of our farmers and our rural communities is protected. Why would he be so defensive in this regard?

It took him over two minutes to even turn to the whole purpose of the bill. I thought, well, that’s because the feedback—and he mentioned it: when we were all at Fieldays just the other day—if you are, like many of the members on this side of the House, entrenched in your regions and in our community, is poor for the National Party. There is poor feedback because the communities know those people that have been so loyal—so, so loyal—to that party that has promised to be the bastion for the rural communities, the bastion for the famers. Those communities know that they have been deserted. They have been upstaged by this coalition Government, and they know that the real champions for the regions, for our rural communities, for those sectors that are the backbone of this country, are on this side. So what an incredibly insightful contribution, and I thank that member.

But now I turn to more serious matters before us. I’m really pleased that this bill is before the House. I am incredibly pleased, and I want to acknowledge the work of the new member Mark Patterson from New Zealand First, from Lawrence. I want to acknowledge him for his work in bringing this bill before this House and working closely alongside the Hon Damien O’Connor. Look, the member prior made note that this bill has been in various iterations since 1999. I had the pleasure of sitting alongside Mr Patterson in a range of different fora. In the communities that he seeks to represent, coming from a sheep and beef background, coming from a very strong farming background, I know that that member is held in very high regard. So when we have an issue like farm debt—we know the rates of farm debt.

Now, over the last 20 years, we have seen our farm debt increase by 270 percent. That’s 270 percent that New Zealand banks, actually, are carrying on behalf of our farming community. That number’s up around $62 billion to $63 billion. It is a large number, and that’s one thing I can agree on with the member that spoke just prior, Nathan Guy.

Now, when you have that level of debt sitting over a particular sector and one that is critical for our country’s economy—we know and we see this play out all throughout our own electorates, those of us that come from rural, provincial areas. We know the immense stress, and, look, I talked about it, actually, a couple of nights ago, but one of the biggest areas that I see or interaction that I’ve had, in particular, with the Rural Women’s support network, has been around the advocacy around mental health—mental health on behalf of the farming community. Now, why that has really come to the forefront is because of the amount of foreclosures, because of the debt levels that these families are carrying, and because of the impact of the wellbeing of the sector. It’s been a rough time, a really rough time, and I want to acknowledge those people that have really put a spotlight on the wellbeing of our farmers and our farming communities.

Now, when you’re carrying that level of debt, whether that’s a small farm, one of the things—in an area like mine, up in the East Coast, you’ve got a lot of sharemilkers. They might have really high levels of debt to equity ratio. Now, their incomes, of course, are dependent on factors often beyond their control. So let’s take a biosecurity outbreak like M. bovis. Well, they can’t control that but their vulnerability to their debt that they’re carrying, obviously, that continues. So this measure—and this is why I really do support this measure, this alternative dispute mechanism to require or enable the option for both banks and for farmers to be able to trigger the ability to go through a mandatory mediation process—the guts to the bill is about early intervention so that we’re not getting to that point where we’re having to see foreclosures, because we know in our communities that when one farmer loses their farm because of debt, that has a massive impact in the broader community—to the wellbeing of the community in every aspect in these small rural towns. The guts of this bill is about early intervention.

Now, the member just prior said, “Well, if you’re getting to that point where you need mediation, then you’ve gone too far.” but just prior to that he said, “But people are carrying such high levels of debt because they are invested and have seen the prosperity that they can obtain from the sector.” So the thing is that a lot of these—sharemilkers, in particular—go right out on a limb, and they want to become prosperous in these areas and they’re working blimmin hard, but sometimes things beyond their control happen. So this bill triggers a process where you can call on mediation.

Now, what I like about it in particular is there are really tight, confined time frames that you can have, basically, an “out-ser”—subject to, you know, any exemptions and deferrals that the parties may mutually call upon—but you’ve got 60 working days to get to the end of that mediation process. Because what’s happening right now is that there is so much uncertainty and things are going all over the show—it’s the stress of not knowing when you might have an outcome or an answer from that bank.

The other thing that is coming through from a lot of farmers in the rural community is that they’re feeling a little bit the power imbalance between the big bank coming after your home, your property, and all these types of things. This restores a bit of balance to those discussions, particularly at a time that’s very frightening for many. So, in terms of the actual cost to establish this mediation service, it’s really low-cost. It’s low-cost when we’re talking about the implications across the board. So I think they’ve estimated, the fine people at Treasury and the Ministry for Primary Industries, it’s going to be about $350,000 to establish the scheme and about the same, there or thereabouts, to maintain it per annum—so, really low-cost—but the certainty, I guess, long-term, ongoing is something that I think so many farmers are looking towards us right now and going, “Thank you.”

Now, I’ll turn to the words of Richard McIntyre. He’s the president, I think, of the sharemilkers section at Federated Farmers. He had a big discussion the other day about this and just said it’s about time that this bill comes before the House. He said this is hugely beneficial for those sharemilkers that are impacted, kind of disproportionately, in this area. So it has really good support from not just the “Feddy Farmers” but from those throughout the sector. It also has support from the banks because—now, the banks, obviously, they’re carrying massive debt and they have to carry the risk of that debt that they discharge. Well, I don’t think that the banks are wanting to—well, actually, I won’t get into what the banks want to do, I don’t blimmin know. But what we do know is that they support this particular measure, and so, I think, again, just to acknowledge the stewardship of, of course, the member Mark Patterson, but, alongside the Hon Damien O’Connor, who has worked to ensure that they’ve got the balance right when working with both sectors, the farming community and the banking sector.

So I think this is a day that we can be immeasurably proud of on behalf of our rural and regional communities. This is a small but pragmatic step to ensure certainty for the wellbeing of our regional communities, and it’s without hesitation that I commend this bill to the House.

Thank you, Madam Speaker. Businesses only want certainty from Government. They only want to know that there is a Government that is prudent in its management of the country’s finances, that understands the rules that they operate their business in. Businesses don’t expect Government to give them a handout; they don’t expect Government to be there to make them survive in their worst times.

That is the fundamental prospect that we see in front of us in this House tonight, because I, personally, don’t believe there is a need for a bill like this. I understand there’s massive farm debt and I understand farmers get into trouble, but every business can have that problem. What we actually need from a Government is a Government that controls its expenditure and provides the environment for business to flourish and make commercial decisions, and not have those decisions be influenced by the long hand of Government going into business and changing the prerogatives that manage how those business people make their decisions.

What the member Nathan Guy said was completely true. What he went through was a whole range of things that this Government has done that is destroying confidence in all businesses, but especially in our rural communities. I say to that member that just finished speaking that the reason that the public out there and the business community are so against this Government is because they see a Government that wants to be entwined in their commercial decisions, a Government that does not understand the economy—

💬 Mark Patterson: You’ve changed—changed back, unfortunately.

—and that does not understand how business operates. Now, those members over there, New Zealand First members—they’re going to stand up in five minutes’ time and say this was all their idea, this was the thing that they had promoted, and Darroch Ball did. It was his idea. They’ve given it to Mr Patterson, for some unknown reason, and I’m not sure even why the Labour Party has to go through the indignity of having to lead off the debate on this, because it is a New Zealand First bill. It’s a New Zealand First cop-out, because they want to go to the regions and into the farming communities and try and buy their votes and say, “Look, we did this, we’ve done this, we’ve been there for you.” That’s not true. Everybody knows in the rural communities that New Zealand First is not there for them, that New Zealand First creates more problems than good.

💬 Fletcher Tabuteau: Talk about the bill.

They understand that this bill is bad for them, Mr Tabuteau. He says, “Talk about the bill.” Well, the bill isn’t needed if you’ve got a Government that does the right thing. It isn’t needed if the Government understands its finances. It’s not needed if the Government goes out there and slaughters the rural economies, as it is doing at the moment. There is no confidence out there in the banking sector, amongst farmers, because they know what’s coming from this Government. They know what’s going to happen around the environmental reforms. They know what’s going to happen around taxation over time.

💬 Dr Duncan Webb: Scaremongering.

What? Did you say something?

💬 Dr Duncan Webb: I said you’re scaremongering.

Is it that member there who said something? He’s never said anything in this House. He’s come from Christchurch, doesn’t know what the hell’s going on in the rural sector, and yet comes and makes all these comments here this afternoon. Well, I think that member needs to go and have a look at what his Government’s policies are. Look at what they’ve done in agriculture in the last couple of months, or are going to do. The tree aspect is a really important part of it. You know, New Zealand First and their billion dollar trees. That is causing major land use change in New Zealand and that puts farmers under financial pressure. Once farmers are under financial pressure, then they need to have a bill like this. If the Government of the day didn’t cause all those problems, then you wouldn’t need a bill like that.

So that’s the point that our members have been saying: that the New Zealand First - Labour coalition Government is actually causing the lack of confidence in the New Zealand dairy and agriculture and horticulture sectors, and, directly by causing that, now they’re trying to repair it with a farm debt mediation bill on the other side. That is exactly the problem when you have Government involvement in the economy.

What businesses really want is just certainty. They want to know that they can get on with business within parameters, and they don’t want Government trying to take on the one hand and give on the other and think that they know best. That is the ideology that you find in the left wing all the time. That is this thing that never works, has never worked economically, and will continue to fail in the future. Thank you, Madam Speaker.

I am very humbled actually to get up and speak on behalf of New Zealand First on this Farm Debt Mediation Bill (No 2). This bill has a long genesis. It goes back to a member’s bill by Doug Woolerton in 1999. It was also a bill under the name of Hon Ron Mark in 2015, and more latterly under my name in a previous iteration as a member’s bill.

How disappointing it is to see the grudging acceptance of this bill by the National Party. This is a thoroughly sensible and well-needed measure, particularly in this time, and how disappointing—a party that used to purport to stand up for the regions playing cheap, petty politics. While this bill may have come forward as a member’s bill, it was actually of such importance and magnitude that it did deserve the full weight of the Ministry for Primary Industries officials’ support and the wider consultation that a bill of this consequence should have behind it. So I condemn the National Party, actually, for their grudging position on this bill. We have been championing this measure for 20 years. They are grudgingly there now and dragging their heels, and they should have a good look in the mirror if they want to purport to champion the farming sector. So in that light, I would like to thank Minister Damien O’Connor for bringing this bill forward and giving it the resourcing that it needs to make the bill an effective measure for a formal mediation process for farmers.

Farming is an inherently risky business. Much of the success of an individual farmer comes down to a number of measures that are beyond their control, no matter how competent they are as an individual operator. There is climate risk. There is commodity price risk. We have seen some major biosecurity outbreaks that seem to be a constant presence. We’ve seen the M. bovis outbreak, of course, recently and not long before that a major Psa outbreak in the kiwifruit industry. We have a fruit fly incursion at the moment that we’re dealing with. There are risks everywhere. We have got Trump and China going head to head in a trade war that throws currencies about in export markets. So there are a lot of things outside of farmers’ control.

At a macro level, the $63 billion worth of debt has been identified by the Reserve Bank as a systematic risk to the New Zealand economy. On top of that, we have a banking sector that is in a managed pull-back. I think it’s not a well-kept secret that there is a pull-back from the Australian banks in particular, some of it related to the banking inquiry over there, where the banks are just rationing their credit. And when you’ve got $63 billion worth of credit—and that credit is held in a relatively small number of hands. Only 20 percent of farmers carry almost all the debt or the vast majority of debt, so it is systematic risk. Of course, farming supports 350,000 workers and much more across the wider economy, if you spread that out, and, of course, our $46 billion of exports. Listening to the Opposition speakers, you would think that agriculture was in dire straits. In fact, we have record exports at the moment at $46 billion and growing.

So at a macro level this is a risk but, at a personal level, when farmers to get into trouble, there is a significant power imbalance. The banks literally hold the purse strings and the farmers’ resources. To have a fair process is somewhat limited, and those processes tend to be when things have got to a point where they’re past the point of no return. The absolute aim of this bill is to have the fence at the top of the cliff. This is not, as Mr Bennett seemed to infer, designed to rescue people that have made poor commercial decisions or are, in fact, in an insolvent position. This is not to do that at all. This is to put a circuit-breaker in place that either party can call in so that, before we get to that stage, there is a chance to have a fair, balanced discussion about the direction of the farming business before it gets to the point of no return, so some good decisions can be made.

I know that farmers are so connected to their land. It is so deeply ingrained in their psyche, and many of these businesses are multigenerational. They will do almost anything to maintain their farms, particularly a family farm. Actually, sometimes it will be saving them from themselves. So it is not designed to mitigate commercial failure. It will give the opportunity for a managed retreat or an exit with dignity.

It also will put some oversight on to the sector and lending practices. I know, since having the member’s bill, I’ve become a bit of a lightning rod in our office—Michael Haliday, up there in the gallery, who I commend for having done a lot of work on the member’s bill. We have been inundated by farmers coming to us with their issues. We have two cases at the moment in front of the Serious Fraud Office (SFO) because, while you have a first-tier level of bankers who are, broadly speaking, responsible, you have behind that some vulture second- and third-tier lenders that are circling, and farmers desperate to hold on to their farm will sign almost any piece of documentation to hold their farm and they will dig deeper and deeper into debt. That’s what we’ve seen, and we’ve seen some shoddy behaviour, and the SFO will sort that out and have some justice there, hopefully, for the farmers that we are representing there.

The other thing about this that I think is really important is that loans are secured against farmland, of course, but farm machinery, crops, livestock, wool, aquaculture—we have to, in the select committee, I think, nail that down. I’ve had beekeepers come to me, “Are bees livestock?” I would argue that they are, and I would hope that they will be incorporated. But particularly, as Kiritapu Allan outlined in her contribution, the sharemilkers, who are such an important part of our biggest industry—the dairy industry—are particularly vulnerable. And in this banking pull-back that we’re seeing at the moment, they are the ones that are the first to feel the squeeze.

As Richard McIntyre, the chair of the Federated Farmers sharemilkers section, said, this is a much-needed piece of legislation. I hope the National Party were listening to Richard. I hope they were listening to Andrew Hoggard, the vice-president of Federated Farmers, who also endorsed this bill. I hope they were listening to Rural Women New Zealand’s Fiona Gower, who said this was a much-needed piece of legislation. I hope they have taken notice of the Hayne royal commission in Australia into their banking sector. That commended the New South Wales legislation, on which this is based, and recommended that the other states in Australia pick this up, such has been the success of that piece of legislation in New South Wales. This will put some independent mediators in place. There are good provisions in there to make sure the allocation of these independent mediators is done fairly so that it’s at the agreement of both parties—and, again, that’s taking away that power imbalance; it’s having equal parties sitting at the table and having a balanced discussion.

So New Zealand First have absolute pleasure, actually, in bringing forward this bill. We have fought long and hard for this measure to come forward. We have been stymied at every hurdle along the way, and there are some parties opposite that need to look in the mirror as to why they would have done that when this is such a sensible piece of legislation. So New Zealand First and I have the honour, actually, of commending this bill to the House. Thank you.

Thank you, Mr Speaker. Well, I’m a little bit confused, actually, because the bill that was introduced by Darroch Ball was actually roundly criticised because it was unworkable. We actually, in the select committee, did our very best to try and get that bill into a shape where it might actually make some difference and work, but we couldn’t get it there; it just simply wasn’t possible. Fortunately, the Minister of Agriculture has come to the rescue and has actually done a bit more work on it. I’m still yet to be convinced that this will work. It’s a laudable attempt to have a bill that will work, but I’m yet to be convinced, and we’ll just have to wait and see.

I do share some of the concerns that the Hon Nathan Guy raised—the $6,000. Will that be enough? Is that enough cost? I think it will actually cost more than that, and I do have some experience in that from my former life with New Zealand Winegrowers, when the wine industry went through a downturn after having had two large vintages in a row and then the effects of the global financial crisis coming a bit later through to the wine industry, when there were a lot of issues around debt. So I’ve actually seen it first hand and have been involved in some of those negotiations. The problem is that by the time we get to a situation where this bill will be used, it’s already down the slippery slope, and actually what you’re really talking about at that stage is often what the exit plan is. I have seen from first-hand experience that that takes quite a lot for the people who are concerned to actually come to the realisation that there really isn’t any point in continuing on and it’s best just to move out.

The problem is that the longer you delay it, the more it costs. Now, this will put a halt to those costs going up while you’re in that situation—and I think that’s a great thing—but emotions run high and sometimes the opportunity to take a step back and have a good look at the situation from a bit of distance will be helpful. It is not a simple process, and I don’t think that very many cases will end up being the happy ending that most people might think this bill will do. Why the Ministry for Primary Industries (MPI)? I don’t know why we would have MPI involved in this at all. I don’t think they’re the right entity to be involved in a debt mediation bill at all. Maybe it’s the Ministry of Business, Innovation and Employment; maybe it’s someone else? Treasury, I think the Hon Nathan Guy mentioned. What’s the definition of a farm? That’s going to be an interesting debate. All these things get far more complex when you get into the select committee and into the details. So we’ll look forward to hearing how that will work.

This is actually coming into sharp focus now because of this Climate Commission bill, which will actually load more financial pressure on the farming sector. It already has agricultural risk, which is around climate risk and suchlike, which it’s always had in the farming sector—international markets, currency risk, all of those things—and, then, now we’re adding the uncertainty of an outrageous methane target when, really, the target should be CO2 emissions. This will likely bring forward those debt issues and make it much more difficult for rural New Zealand to get on with this. I was interested in the member Mark Patterson, who mentioned the second- and third-tier lenders, and that’s interesting. Who is involved in this debt mediation bill? That will also be interesting and the definitions when we get into it in the bill.

Yes, we support it, but it’s qualified support. It is a difficult area. I am not convinced this bill is in great condition. We’ll see if we are able to actually rescue it in the select committee, and I look forward to that process.

Thank you, Mr Speaker. On behalf of the Green Party, I rise to speak on the first reading of the Farm Debt Mediation bill, which we will be supporting. We did support the original member’s bill, which has been referred to, which preceded this bill and had some distinctions, but we supported that to select committee at the time. And we support some of the key changes that have been provided in the first draft of this bill, the key change being that there is a new Farm Debt Mediation Bill that establishes a standalone Act rather than amending the Receiverships Act.

I suppose that, if you look at the big picture of this, this is a Government that wants to support people, and particularly our regions, during what is going to be a transition—a transition to a sustainable economy, one in which we’re looking after our land, our water, and our climate—and we want to make it easy for people to do things that are good for the land, that are good for the water, and that are good for the climate. The previous speaker, Stuart Smith, I’m happy to say, is supporting the bill, although he raised a bunch of uncertainty. One thing is certain: if we don’t take action to control climate change that’s caused by humans, our farming sector will be wiped out—in fact, our civilisation will be wiped out—and we don’t have that much time. That’s what the science tells us: that we have to start now.

Now, we should have started 20 or 30 years ago. That’s what the Green Party was saying 20 or 30 years ago, but the next best time to start is right now, and by sending clear signals that the Government is putting in place a plan to transition to a sustainable economy—and that means supporting farmers to make it through the difficult times and to make that transition. We know that farming is vital to New Zealand. It’s in the country’s best interests that farming businesses and families are supported, and farmers who operate a family business often don’t have the resources to negotiate their own protections when dealing with lenders. And we know that unsustainable debt in the agricultural sector has also driven unsustainable farming practices. Not to mention—and this is something that we’ve often brought up—farmers are especially vulnerable to business downturns as a result of conditions that are well beyond their control, and that can be weather, market price volatility, pests and diseases like Mycoplasma bovis, and for many rural communities the failure of just one farm has a rippling effect through the community.

Farm debt is often complex, and resolving the debt problems of financially struggling farms can be tough and drawn out. It’s best for farmers and secured creditors to meet in an equitable manner to constructively and objectively resolve farm debt issues. So what this bill does is provide a fair, equitable, and timely resolution of farm debt issues. It creates a mandatory mediation scheme, requiring secured creditors to offer farmers who default on payments mediation before they take any enforcement action. And farmers are also able to initiate mediation if they wish. Of course, this bill on its own isn’t going to provide all the support and signals that we need to, to transition to truly sustainable land use here in New Zealand, but it’s just one part of the piece that recognises that there are people out there and we can’t make sudden, dramatic changes to the economy without looking after people and ensuring that they have protection.

I also want to note and recognise that there’s often a connection between farm debt and mental health issues. Obviously, the Government has made a huge commitment to ensuring that there’s mental health support for people who need it. Tragically, at times when there have been downturns in commodity prices, people feeling the financial pressure haven’t had the help that they have needed. So, hopefully, this bill will help ensure that there is that additional level of protection so that they have the mediation process before going straight to enforcement. And then the other side of that is the Government’s big investment in mental health and in ensuring that we have those services available to people who need them—whether they’re farming families or people in cities.

So the Government is very much taking a holistic approach and recognising our responsibility to create conditions which are fair and reasonable for people out there but also to set us on a trajectory and to show that leadership in saying, “We have a responsibility. We have an absolute responsibility and need to respond to climate change, and we’re going to break that down into the different sectors and everybody in New Zealand is going to play their part. But we don’t want unsustainable debt to be a threat to the wellbeing and mental health of farming families, and we don’t want there to be a large human cost.” But we all have to work together, and I guess I would ask members on the other side of the House in the National Party to think about how we can all, across all parties, constructively support communities in our constituencies to think about how we do tackle the challenge of climate change, how we do tackle the issues facing the health of our water and our soil, so that we can work together as a country to achieve an outcome that really looks after the future of all New Zealanders.

We’re not blaming anyone for the current situation, but we do need to recognise that some things need to change. When 60 percent of our rivers are unswimmable, we need to do something to change, and we need to support those who are in the sectors that are responsible in part for the degradation of waterways or the degradation of the climate. We need to support them to transition their activities to earning their living in a way that enriches our environment, that enriches our human society rather than cuts it short or pollutes it. I completely believe that that is possible, but we can’t change without change. Nothing will change if we don’t change what we’re doing. So this is just one example of a bill that the Green Party supports because it will look after farmers who are facing difficult situations when it comes to debt. We don’t want to see predatory lending practices. We don’t want to see unsustainable debt drive unsustainable land use. And I’m happy to note as well that virtually all of the stakeholders for this bill support it. Rural Women New Zealand supports the proposal. So I think there’s very, very broad support across the sector for a bill of this type, and the Green Party will be supporting it.

Thank you, Mr Speaker. Can I just acknowledge that previous member’s speech? There was actually a bit of pro-farming in there, and I think this is one of the first times I’ve heard that from a Green member of Parliament. So I must acknowledge you for that, Julie Anne Genter.

I just have a few questions around this bill. It has been around for a long time—around 20 years. I congratulate Darroch Ball for introducing it, and obviously Mark Patterson for trying to get it through the select committee last year. Mark, you did a good job; there just was a bit of confusion around the bill and, unfortunately, you didn’t get it through, but it’s great that the Government’s picked it up.

Can I just start by acknowledging the banks and their support around helping farmers plagued down by Mycoplasma bovis. Take Southland, the Southland Building Society have done a wonderful job of sticking by farmers in quite trying circumstances, and I also want to acknowledge Ray Smith. Since coming on as head of the Ministry for Primary Industries (MPI), he’s been doing a great job with the M. bovis response, and one thing where he’s made a real difference is that MPI have started issuing letters of assurance. A letter of assurance is, basically, when a farmer is under pressure, he may have stock caught up by M. bovis, he can’t move his stock, he can’t produce an income, the bank’s putting a wee bit of pressure on him, the overdraft is increasing, and MPI, to help out the farmer, are issuing letters of assurance. So that’s making a real difference.

Questions around this bill are: how will they apply the definition to farms; what if you’ve got a dairy farm or, say, a sheep and beef farm or a cropping operation with large numbers of trees; what if it’s an overseas-owned farm—will it apply for them? The costs involved—the officials recommend it’ll cost around about $6,000 per farm for mediation. How are those costs split? At the moment, it’s fifty-fifty, but what if the mediation, as it often does, goes on for a number of months, six to 12 months? It’ll probably be a lot higher than the $6,000.

Really disappointed last week during the Primary Production Committee when we asked the Minister of Agriculture, “What have the officials told you in terms of how much the costs of the high-methane targets are on farmers?” Unfortunately, he hadn’t asked for that advice, which is very disappointing. My follow-up question was around the Labour Party’s rural proofing policy—“Show me any evidence in any of your rural policies where you’ve put the rural ruler over it.”—and he said he couldn’t point to any. That’s possibly why this bill’s been around for 20 years and it’s needed now. Farmers are under a huge amount of pressure by this Government. We have a glut of farms on the market. Prices in some areas have dropped by as high as 24 percent. Rural business confidence is the lowest in 10 years. Job growth stalled from 12,000 jobs per month when we left office to 300. Growth’s dropped from 4 to 2.5 percent. Fuel taxes—the first bill after the Budget was a fuel tax. How on earth does that work?

Around 3 to 4 percent of farmers are struggling with debt. This is really going to benefit them. It’s usually the younger farmers that are high on the bill. They have a high loan-to-value ratio. So this bill will benefit them. That’s around 3 or 4 percent of farms who are struggling with debt. It will benefit them.

So we look forward to making this bill the best possible bill we can, and I look forward to the select committee process.

This is a split call. I call Dr Duncan Webb—five minutes.

Tēnā koe e Te Mana Whakawā. This is a fantastic piece of legislation, yet another block in building a New Zealand we can be proud of, one that is inclusive, looks after everyone—farmers included. You know, the wellbeing of farmers is just as important as the wellbeing of any other citizen in this country and absolutely essential to our economy. I fundamentally recognise the pivotal place that those great men and women do out there day and night. I must say I’ve worked in the area of debt recovery—often on the side of the debtor, I must say—and I know the impact that this kind of financial crisis in a farm or other business can cause on mental health, as Minister Julie Anne Genter mentioned before. This is also just being decent and looking after people and having a country where we recognise and we care for everyone.

The other thing that I want to mention here just before I get into a few more details is that this is about building a strong economy, because we have a structural problem, one that the Reserve Bank has pointed out, and that is the high leveraging in some dairy farms. So we’re just getting started here building a resilient economy. The Reserve Bank, in its recent financial stability report, noted—and I quote—“[one] third of dairy debt is held in farms with high [debt to income] ratios. [They] struggle to make profits … repay debt, despite good milk prices.” So there we have it. In fact, it gives the number in there: $35 of debt per kilo of milk solids produced annually. That is a very significant ratio there, and what it means is that if dairy prices fall, then we’ve got a problem in our dairy farm sector. Nobody wants to see a farmer thrown off their land, and I recognise that, for some families, they’ll have been there for generations, that it’s more than just a business for them; it really is their tūrangawaewae. It’s where they belong. So we want to look after not just the financial aspect of this but also something that runs a lot deeper than that.

We know that mortgagee sales are not the best solution, and even if the business isn’t sustainable, even if the fact of the matter is that they’re over-leveraged, they’ve made some poor business decisions, and they need to exit that farm, you want to do it in a careful, managed, and humane way, and that’s what this bill is about. It’s not about letting people get off their financial obligations, it’s not about sticking it to the banks; it’s about saying let’s de-conflict this, let’s negotiate, let’s mediate, let’s find the best solution. That might be the sale of the farm. It might be putting a manager into the farm to help it over the debt crisis that they’re in at the moment, or it might just be giving a bit of a breather so that they can ride out the storm, recapitalising the debt, whatever it might be. So there are a whole lot of solutions which, if you get into a debt recovery mode, you don’t see.

Can I just say this is another example of this Government being innovative when it comes to dispute resolution. Just like the Canterbury earthquakes tribunal, we’re not doing it the same old, broken way; we’re trying new things, and this is exactly where we’ll need it. So we’re going to have a farming sector which, if the farmers get into trouble, they will be dealt with reasonably, carefully, and if the banks don’t act in good faith—or other creditors if they don’t act in good faith—you can hit the pause button for a full six months. So it’s a real incentive for banks and other creditors to come to the party and try to work through this debt crisis.

So, once again, a great piece of legislation doing it differently, doing it right, doing it in a caring way, building a New Zealand we can be proud of. Thank you, Mr Speaker.

I call Barbara Kuriger—five minutes.

Thank you, Mr Speaker. It’s interesting now today that the Government is making a claim of being all things to farmers, and, you know, this bill is a step in a direction towards being kind to farmers, but I can say that out there there’s a whole lot of things going on at the moment. Fieldays was mentioned, I think in Kiri Allan’s speech around farmers. Well, what farmers were most concerned about at the moment wasn’t the pricing, it wasn’t the financing—although there is that concern around banks tightening up because prices are good at the moment—what they were most concerned about was uncertainty, and it was the uncertainty of all the things that are coming at them around climate change, for which they don’t have the tools, around methane—those sorts of things.

I was very pleased to hear the speech from the Green Minister Genter today around the transition, because what farmers are most concerned about at the moment, with all the things that are coming to them—all they want to know is: “Where am I now, where do I need to go, and how long have I got to get there?” So, if I’ve got a request of anything around this Government other than financial mediation, it is around some sort of mediation of transition for farmers, because they’re trying their best, but they just don’t have the tools. So thank you for that today. I will also acknowledge the member Mark Patterson, who does a lot of good work in the farming space.

I want to say here and now that bankers are generally good people. For someone who has been in the dairy farming industry all my life, and financially been in it for about the last 35 or 40 years, our experiences with banks have been really, really good. The front-line bankers out there are generally very good to deal with, generally very conciliatory, and generally will give people an opportunity, if both parties are willing, to come to all sorts of arrangements, actually. But those bankers are currently, right now, because of the banking system coming under a lot of pressure to tighten—and there is a lot of farm debt out there. So, again, it’s about giving people the opportunity to transition to a new time, and, you know, debt does need to come down and it needs to be into some sort of context.

But what I will also say is that we are talking about helping farmers, and when I talk to people about mental health in rural communities, wellbeing, work with Farmstrong, finance is only one of the stresses that put people under pressure. There are all sorts of other things. Sometimes, they begin with finance; sometimes it’s around relationships, but it can be all sorts of other pressures, and sometimes those pressures can also be the things that get people into financial debt. So I think it’s the uncertainty of a whole range of things that we can look at as being responsible for the mental health of farmers.

We’ve had a few questions today about our little bit of just holding back on full support of this bill. We’ve said we’ll support it at first reading and we’ll get it to committee stage, because there are some things that others have brought up today around the definition of what is a farm, but I also would question the involvement of the Ministry for Primary Industries (MPI) in this process. I do think there are other Government agencies that are far better placed to be doing that role given that MPI is probably going to be involved in a range of things that are actually implemented in this country around farming. So, to me, there could be some of those situations where it could be quite a conflict for that organisation to do it.

I just want to finish my contribution this afternoon by mentioning sharemilkers. Sharemilkers were mentioned earlier on in the day. When downturns come, when pressure comes on, the landowner farmers have much more stability than the herd-owning sharemilkers, or even more so the sharemilkers and the farm managers who have no equity in the property. When things get tough, it is often the sharemilkers, the farm managers, and the farm staff who become the people that are most hurt. So I just want to make mention of those people today. So thank you for the opportunity for a contribution. Thank you.

Thank you, Mr Speaker. I just wish to make a brief contribution but wholeheartedly in support of this bill at its first reading. We’re implementing a farm mediation scheme under this bill. It’s one of those bills where we actually hope that we don’t have to use this legislation too much, but it’s there. It’s a mechanism that’s in place that we want to try and alleviate the stresses that many farmers and other folks involved in the primary sector face, with the burden of debt and their relationships with their bank.

So this is a very pragmatic piece of legislation. I want to commend Minister O’Connor and also Mr Patterson for their work in bringing this bill to the House. It is very important. It is a process. It does not get the lenders off the hook, but it puts in place a process where, hopefully, mediation can help, in certain instances, navigate a way forward for both the debtor and the creditor. So I support this bill. I’m looking forward to hearing submissions through the Primary Production Committee. I think there will be interesting questions just around the scope of the bill, just around the mechanics of mediation.

I note that the bill incorporates tikanga Māori in the mediation process, so that’s quite an innovative measure. I’m looking forward to learning a bit more about that, but I certainly hope, in terms of the Māori agribusiness—inherently, Māori farming interests are very conservative, so they don’t have a hell of a lot of debt that they have incurred, just by nature of the fact that by having communally owned land, banks are reluctant to take on security interests around Māori land as such. But it’s nice to see that there is recognition of that within the bill. So I’m looking forward to the further progress of this bill, and I commend it to the House.

Thank you, Mr Speaker. Look, I rise to take a call on this bill with a little bit of background in rural banking that I’d like to bring to the debate. I came into the rural banking sector off the back of the global financial crisis, and that was an interesting time to get into banking. There were a number of challenging discussions that were being had on farm at that stage, and then, of course, through the subsequent years, there are ups and downs in farming, as there are in most industries, and, on occasions, there would be situations where clients, unfortunately, got into a position that was not sustainable longer term.

In those situations, the banks—certainly the ones I worked for, but across the industry—would always be proactive. No bank makes a lending decision expecting to have to foreclose on someone, or wanting to. That is a worst-case scenario. It is not good for either side of that contract, and, certainly, from the bank’s perspective, it’s not good from a reputational perspective as well, if they’re seen to be acting in a manner that’s not believed to be consistent with the general lending practices.

So as bankers, we would go out of our way to pre-empt any potential issues arising with clients. First and foremost, you have to understand the business, so that’s critical, and build that trust with clients. Then it’s about understanding where they want to be going, what the numbers look like, and how they might get there, mitigating some of the risks along the way. What we’re proposing here in relation to those bank agreements, actually, I think, is not particularly necessary, because banks have whole departments set up to work alongside clients to help avoid this situation.

But the part that I particularly like within this legislation is that it captures all securitised lenders to a particular client, and that’s the one where I feel there is an actual need. That might be family lenders, it might be third-party lenders, or whatever, that have got into some sort of contractual arrangement with a farming client to lend money, and then subsequent issues around that as performance might not meet expectations, etc. So this will, in that situation, be a good tool to enable both parties to come to the table and, hopefully, get an outcome that is as best as possible for those particular parties. So I think, in that aspect, it’s good.

From the wider banking sector, I don’t think there’s as much need as the Government might suggest, but having said that, it’s not all bad. My question would be around the cost, of course—how that’s managed, who takes that on. Look, this is a challenging area, and we’ve seen a number of issues in farming over the last few years. Farmers are certainly—and I’m hearing this in the Waikato as well—feeling under pressure, and there’s a lot of regulatory uncertainty on the horizon; so anything we can do to provide a bit of additional comfort should certainly be looked at, and I think we’ll need to scrutinise this in further detail before we know whether it’ll be supported through the remaining stages. But, at this stage, we commend it to the House. Thank you.

They can’t help themselves, can they? Here we have a bill in front of the House that is going to make a tangible difference to the farming community right across this country, and that is the community that that side of the House is supposed to represent. This bill is going to help many families in tough situations, and it recognises the unique place that farming communities have in this country. And can they bring themselves to get behind it? No. They’ve got to have a whinge. They’ve got to put the boot in. Some of the speeches have just been a list of things they don’t like about this Government rather than actually standing up and saying, look—sending a message to the rural community, a message that they love to see: this House coming together and supporting something that will benefit rural communities. So I’m not going to waste any more time. This is a great bill. I’m looking forward to talking about it in the select committee for primary production, and I commend this to the House.

Bill read a first time.

Bill referred to the Primary Production Committee.

on behalf of the Minister of Agriculture: I move, That the Farm Debt Mediation Bill (No 2) be reported to the House by 4 November 2019.

Motion agreed to.