Farm Debt Mediation Bill (No 2)

This bill will establish a farm debt mediation scheme which requires creditors with security interests in farms to basically offer mediation to farmers before taking enforcement action in relation to that debt, and allow farmers, basically, an early option to get involved in sorting out that debt. Often, there’s quite a bit of a power imbalance between farmers and banks. Banks have huge debt departments once farmers get into trouble. But this bill, at the end of the day, is there for farmers. There’s been a huge amount of debt increase over the last several years—I believe 270 percent; around about $63 billion compared to 20 years ago.

I just want to acknowledge that this bill started out a couple of times, back in the 1990s, with New Zealand First. I believe Darroch Ball pulled it out of the box and then transferred it to my good parliamentary colleague Mark Patterson—good work, Mark, on this. Mark and I had a very entertaining Sunday together. We were both dressed part way up as Santa, in the Gore Santa parade, throwing out lollies to kids. We both did a good job of throwing out the lollies and not getting them in anyone’s eyes.

But back to this bill; this is a good bill for rural New Zealand. The objectives of the bill are rather simple: it’s to help farmers in financial distress and promote turn-around solutions early on to give farmers the best possible chance of getting out without losing their farms. Owning a farm is a little bit different than, say, owning a residential home. A farm produces income, but often you’ve got the family farmhouse on the farm. It’s similar to, say, a dairy that has a culmination above the dairy. This bill doesn’t go quite that far; it just sticks with the rural aspect. But we also consider this debt mediation bill another mechanism to keeping those banks honest.

Throughout the select committee process, we heard 30 written submissions and oral evidence from 18 submitters. We heard from farmers. We heard from some of the banks who are all in agreement that this is a good bill. We heard some devastating stories from farmers who have been through this; they’ve lost everything, and they were speaking very positively towards this bill.

Just one clause I’d like to speak about briefly is clause 9A(2) and (3), which is most of the provisions from clause 58 as introduced. These relate to an appointment of an administrator or receiver under the Companies Act. However, we recommend deleting clause 58(2)(c) of the bill as introduced, which relates to the appointment of a liquidator under section 241 of the Companies Act. This provision is unnecessary as a creditor is unable to make an appointment, and an application for an order to appoint a liquidator will be covered in clause 9A(3).

Can I lastly just acknowledge the different members on the Primary Production Committee. We do work well together. We’ve got a very fair and balanced chair in David Bennett, who’s appreciated from all sides of the House; a huge amount of respect built up over the last two years. On that, we support the bill. I commend it to the House.

Thank you, Mr Speaker. It is a big moment, actually, for New Zealand First to rise in support of this bill; a bill that first came into being in 1999, when Doug Woolerton put in a private member’s bill, which was subsequently taken up by Ron Mark, and in later times—as Hamish Walker alluded to—it was under my name for a brief period. I would just like to acknowledge the Minister of Agriculture, Damien O’Connor, who saw that the bill had a complexity beyond the scope of a private member’s bill, and allowed it to come forward as a Government bill—so we do thank him for that.

There are a multitude of reasons for this bill, but, essentially, if you look at the big picture, we do have $63.7 billion worth of farm debt at the end of September. It is actually identified as a systematic risk to the New Zealand economy by the Reserve Bank. Just to put some context around that, in 1999, when Doug Woolerton brought his bill forward, it was $11.9 billion. So we’ve seen a massive lift in farm debt in the last 20 years.

I guess some people would question why we would need it now, given record pricing—we had Fonterra come out the other day, lifting their payment, and some even saying that there could be an eight in front of the payment next year—and, of course, the red meat sector and the horticulture sector are going extremely well at the moment. But the time to fix the roof is when the sun is shining.

“Why farmers?” is the question that often gets asked outside of mainly farming circles, probably. The reason for that is quite simple: many of the things that affect farmers are actually beyond their control. It’s actually incredibly complex business, being a farmer. It’s totally underrated in terms of the complexity. I think the popular vision is of shearing or milking cows or putting up a fence or driving a tractor, but the modern farmer’s got to be a vet, an agronomist, a soil scientist, an ecologist, a market analyst, a builder, a mechanic, has to be able to negotiate regional council and processing company compliance, has got to have a deep knowledge of accountancy, and, increasingly, environmental issues as well. So farmers at the top of their game, I would say, would be up there with any business people in New Zealand. To be at that very top echelon is quite a remarkable feat, given the range of skills that you do need to have.

But as I said, many of the factors that actually dictate your financial performances are beyond your control. We’ve seen a lot of it lately: of course, climate’s always been an issue, but the biosecurity, the Psa, the bovis, and fruit flies—to name a few. We’ve got trade wars and, of course, we’ve always got markets and currency, and, of course, the banks. We’ve seen a contraction of the banks’ lending criteria as they seek to claw back some of that $63 billion and are looking for higher-principle repayments.

The thing that probably cuts to the core of this is that many of these farms are multigenerational. They’re not just a business; they are a family home, they are, essentially, where memories are made, and there’s a real sense of being at one with the land. We went to the Nuffield Scholarship—those us that went the other day to see the announcement of the Nuffield Scholars, and heard some of the presentations from last year’s scholars. One of last year’s scholars cited a report from Oregon in the United States, where losing a family farm was considered to be the equivalent of the loss of a child—that’s how traumatic those events can be.

Of course, we know with our farmers that there’s a propensity for mental health issues. I heard Jan Logie get up here the other day, and say—in terms of our response to the suicide rates—that farmers should actually be a category of their own. I guess there are so many factors that lend themselves to being susceptible to those mental health issues, and I think isolation is certainly one of them. It is the perfect environment to withdraw from society without, potentially, anyone knowing you’re doing so, and withdrawing into yourself.

So when you come under financial pressure, this bill gives a mediation process. It gives a security blanket of sorts that when you’re faced with this massive power imbalance, when you’re up against a major multinational financial institution, you will have a mediation process that guarantees some fairness and some transparency. That is not to say that that will be a “get out of jail free” card. This is not designed to protect businesses, farmers as businesses, making poor financial decisions or just poor financial performance; it’s not about that. It’s about making sure the process is a fair one and getting the fence at the top of the cliff, rather than waiting for the train crash at the bottom when it all turns pear-shaped.

The banks have gotten behind this, and I welcome their support. They were a wee bit reluctant at the start. They were favouring a voluntary process. We’ve seen many of the same banks operating on the other side of the Tasman not performing as ethically as we would expect here. There’s not the same level of evidence of that here, but they’re also not without precedent in terms of how they had behaved. It’s not that long ago that the credit default swaps that they were—not forcing upon farmers but marketing very hard on farmers. It’s quite a technical financial instrument that up to about 2,000 farmers took on board, many of them under false pretences, and there was some compensation paid out. So banks aren’t without previous history of putting some pressure on them. We’ve heard a Federated Farmers’ survey recently that farmers are feeling under pressure from their banks: 23 percent, up from 11 percent last year. So it is on the rise as these capital requirements and the squeeze comes on our farmers.

Just going back to the select committee process, it was a good select committee process. I think it’s the best select committee process I’ve been through. Hamish Walker alluded to it in his contribution. I acknowledge Amy Adams here, who I thought put her formidable legal mind in play and the likes of Kiritapu Allan and others that had the skills to really tease this out, because there were some issues there to work through.

I’d acknowledge the chairman David Bennett. David Bennett, for those cricket tragics out there, I would consider him to be the Martin Guptill of select committee chairmen: can be brilliant on his day but does lack quite a bit of consistency, and, when he’s bad, he can be very bad. But in this particular case he did a very good job. So thank you to the committee. I’d also like to thank the submitters. There were 30 of them, as was referred to earlier. There are a few that stood out; some of the farmers that came forward with their heart-wrenching stories—Richard McIntyre from the Federated Farmers sharemilkers. One of the main changes that we made was on Richard’s recommendation that we made a maximum cost to the farmers of $2,000, because he felt that even those $6,000 or a half share of a $6,000 estimated cost would be perhaps off-putting to some financially stressed sharemilkers who are some of the more vulnerable of our farmers. So on that recommendation, the committee had put a $2,000 cap on the cost to farmers.

We widened the scope a little bit too to bring in things like apiculture and the aforementioned sharemilking. We took out some stuff too: agricultural contractors. So it was a really good shaping of the bill.

So, just in conclusion, I would like to circle back to the start, because, as a smaller political party within the spectrum—and I’m sure the Green Party or the ACT Party would agree—you don’t get to enact your whole policy programme, much as New Zealand would be a better place if we could put that visionary New Zealand First policy platform in place. But the reality is we don’t. We have to compromise on so much. But in regards to this bill, this has been a longstanding New Zealand First bill and policy platform. We are really proud that we’ve been able to get it through. We do acknowledge, again, the Minister and the whole Parliament for getting behind this bill and allowing it to come into legislation. So without further ado, I commend this bill to the House.

Thank you, Mr Speaker. I do want to take just a brief call this evening on this final reading of the Farm Debt Mediation Bill (No 2). I want to start by doing two things I never thought I’d do in my time in this House. The first is commend New Zealand First for their leadership on this piece of policy. In my dying days in my career, who knew that would happen? But the second is even less likely, and that’s that I want to acknowledge David Bennett’s chairmanship on the committee, which is something I also never thought I would say.

But, when I made the decision to step down at the next election and we had a bit of a rearrangement, I found myself on the—[Interruption] Mr Speaker, can you tell my colleagues to be quiet behind me. Ha, ha!

ASSISTANT SPEAKER (Adrian Rurawhe): Be quiet.

I found myself on the Primary Production Committee. I also found myself with an immense amount of time suddenly on my hands. Anyone who’s been a busy Minister knows that you don’t quite know what to do when the work isn’t coming in by the bucket load. So the poor old officials on the Farm Debt Mediation Bill (No 2) found that I’d turned up to the first committee having read every word of that sucker and having a long list of changes that I thought needed to be made, which I proceeded to share with them in my usual manner.

Actually, I do think we’ve made the bill considerably better, and I think it was a very good, collaborative process across the committee. What was very clear, though, is that farmers are under an immense amount of financial pressure right now. That might seem incongruous given the fact that we do have good commodity prices, but, in actual fact, the banks are putting an immense amount of pressure on farmers, and there are a whole range of reasons—from the foreign buyer ban to the Reserve Bank changes to the Basel changes: the recent capital adequacy proposals. There’s no question that farmers are feeling that heat.

One of the big areas that I certainly focused on in the committee, which we’ve made some good traction on, I think, is to emphasise that a mediation process when you’re at the point of a mortgagee sale is too little, too late. If we’re not sitting down between the creditor and debtor early on in that distress process, when there’s still an opportunity to make changes, then the realistic ability to help farmers get their way back into profitability is significantly lessened. So we worked a lot on that, and I think the bill is far better for it. There are changes that should have been made. I personally think there should still have been an exemption for low-value goods. It would be a nonsense to trigger processes like this because the hire purchase on the beer fridge in the sheriff’s quarters got behind, but, none the less, that’s what this bill currently says, despite our best endeavours.

There are other issues, though, and it’s come to my knowledge that the rural tax advisory group have raised real concerns about tax implications for farmers should there be loan write-offs. As far as I’m aware, there has been no advice, certainly to the committee from officials. I don’t know if the Minister has had advice on it. That is a serious implication that we would certainly need farmers to be well-advised on. So I certainly want to encourage the Minister, through his officials, to make sure that that issue is very much looked into and advice around that is included in the information that goes to farmers involved in the process, because nobody wants to put out one fire and then start a tax fire somewhere else. So with those words, I’m happy to commend the bill to the House.

Thank you, Mr Speaker, kia ora. I’m pleased to take a call on the Farm Debt Mediation Bill (No 2) as the primary industries spokesperson for the Green Party, having succeeded Gareth Hughes. It was interesting at the Canterbury A&P Show last month, just having a conversation with an arable and dry stock farmer. He was talking about how eight years ago he had been pushed hard by his bank to convert to dairying to get higher returns. He had resisted that and now he is very glad that he had resisted because he didn’t have the level of debt that he would have had if he had converted. That is one of the big issues in the farm sector: the significant levels of stress in rural communities that are associated with the very high levels of debt of around $63 billion.

So this bill is a very good one because it does provide for a structured and impartial and confidential mediation process to work through debt problems, and it provides—as the Hon Amy Adams noted—for that processes to be initiated before any enforcement action is taken by banks or secured creditors. So it’s a way of ensuring that, given the complexities of farm businesses that Mark Patterson alluded to, the quite complex issues around debt can actually be worked through—to look at the options, to look at whether exiting from the farm and doing that in a dignified way and wrapping up all of the loose ends in that can occur.

The bill has had very wide support from lenders because of the timely and transparent process that it provides for. I commend the work that New Zealand First has done in getting the bill to the House, the work the Minister has done, and the work the select committee has done with officials in improving it. It is providing for a scheme that, I think, is a light touch and with low cost. I think it’s going to cost about $350,000 to set up and about that much annually to run, keeping the costs down to those who use it. It will become effective next February and come into full effect next October.

I think this is another example of where this Government is providing really practical support for farmers, really grappling with this issue of high levels of debt, the significant stress that that imposes, and the need for better support for farmers to work through those debt issues. I commend the bill to the House.

Thank you, Mr Speaker. I’ll speak very briefly on the Farm Debt Mediation Bill (No 2). Being a farmer myself, I know a lot of farmers around my area are heavily indebted. The only time that they ever have any money is when they sell up and retire. So any sort of a bill like this that can help in keeping people on farms and keeping people farming, we support.

Now, this bill started off as a very poorly drafted, flawed New Zealand First member’s bill. The original bill has been substantially improved by the sheer brilliance of the chair, David Bennett, and the work that he did—incredible, incredible, incredible guy—through the committee process, and the feedback. I know that there were 30-odd submissions, and the select committee process really works if you do it properly. It was great to see this bill go through that process and actually get improved, unlike the fiasco of last week—the fiasco of last week—when there was no select committee, under urgency, and what did we get? We got a bill that’s a Clayton’s bill. So it’s good to see that this has gone through.

Federated Farmers support it. The bankers supported it. There is a large amount of debt in this country—$62.8 billion—and that’s increased by 270 percent over the last 20 years. So anything that makes it easier for farmers to keep farming, we support. I commend this bill to the House. Thank you.

Members, this is a split call. I call Dr Duncan Webb—five minutes.

Kia ora, Mr Speaker. Look, this is a good bill and it has been improved in the select committee, but can I just really point out that the merits of this bill are that it’s looking for a non-adversarial process to assist parties through a very difficult time. Mediation is a great alternative to genuine outright conflict. That’s, essentially, the centrepiece of this bill. It means that people won’t have to have recourse to the courts, which don’t work for everyone.

💬 Hon David Parker: You call yourself a lawyer?

Thank you, Mr Parker. Look, it’s a fantastic step forward, far overdue, and I hope we see this in a whole lot of other areas as well. I commend this bill to the House.

Thank you, Mr Speaker. The Farm Debt Mediation Bill (No 2)—well, here we are: the third reading. This is an interesting piece of legislation that, on the face of it, has broad support, and understandably so. It’s pretty benign, to be honest, in terms of what it’s trying to achieve. New Zealand First have created another solution looking for a problem, in large respect, but there are some aspects to it that have some merit. In particular, the key part of that that I think is relevant here is around creating a mechanism that enables mediation to occur not just between a borrower, a farmer in this instance, and the lender being a mainstream bank but, actually, between the farmer and whatever that lender might be, whether it’s a third party or a second- or third-tier lender or a family group or some other related entity that is not a mainstream bank.

The mainstream banks, typically, have pretty robust processes in terms of working through challenging scenarios with their farming clients and try to pre-empt that as much as possible for the clients’ benefit, but of course for the banks benefit as well; there’s reputational risk if things don’t go well for a client. And so, unsurprisingly, they contribute significant investment to making sure they work through that process. The real opportunity in this bill is actually providing that more detailed mechanism for those that aren’t in a corporate environment like that, who don’t have those structures around them to work through these processes. In those situations, there does need to be some clearer pathways to work through the challenges presented by whatever particular issues the farmer might be facing that means they are unable to meet their obligations from a financial perspective.

So, on that note, we support those aspects of it in particular. There is some good work there, but, again, broadly, as I mentioned, it’s a solution looking for a problem. New Zealand First started it off, the Government’s picked it up, and good on them for doing something. There are some good aspects to it. At the end of day, we’re seeing more and more need for mitigating issues financially in the rural sector, and that’s largely driven off some of the change in policies we’re seeing under this Government—a significant reduction in business confidence in the farming sector. Farmers in particular are looking very concerned at where the future is for them and wanting to see a bit of clarity. So this can, potentially, fill that gap a bit, and so we do support it.

The preceding speaker, Tim van de Molen, may feel that this bill is a solution looking for a problem, but as I look across the Chamber, I can see a number of problems looking for a solution. I think that might come around in about November of next year.

I want to swing on to a more positive note, though, as the member who’s able to conclude the debate on this bill, to commend my colleague Mark Patterson, on whose initiative this bill commenced its legislative journey, and to commend all members all around the House in a spirit of a cross-partisan approach for supporting this bill on its way. It is a good bill that does address a real issue, which is the significant stress that farmers often face because of the debt that they have to undertake as a part of their business and the challenges that they can face in a very dynamic and difficult environment, at times.

It’s a practical bill; it doesn’t solve all of the problems in the rural sector that farmers sometimes face, but it will make a real difference. And, on this side of the House, we are proud to be a Government that addresses the needs of all New Zealanders, including rural New Zealanders, and this bill is a part of that. I commend the bill to the House.

Mr Speaker, what I just witnessed from the chief whip of the Labour Party was quite extraordinary: Marja Lubeck primed up to give her speech and the whip just stands up and steals her thunder—didn’t even look round.

ASSISTANT SPEAKER (Adrian Rurawhe): Actually, it’s the Speaker who decides upon who speaks, OK?

My apologies, Mr Speaker. Anyway, I observed; it wouldn’t happen on our side—it wouldn’t happen on our side.

Look, we are supporting this bill because we support early intervention. We think that a mediated outcome in distressed situations is absolutely the way to go. I also note that both the Reserve Bank and the banks that have been public on this have supported this as an approach, and we’re happy to do it on this side as well.

If I can make the observation, though—and I did this the other day—it’s a consternation, really, in respect of Mark Patterson, because the debt in the rural sector is currently around $63 billion, which is a lot of money, and there is record high commodity prices, and I hope dairy prices go to something with an eight in front of them, but there are around 200 farms, according to the Reserve Bank Governor last week at the select committee, that are in major trouble—major, major trouble. And whether that average debt is $10 million, it’s of significance, and one of the things that this Government is responsible for is changing the overseas investment laws to the point where international companies cannot purchase some of those distressed assets. The net result of that—

💬 Hon Members: Good job too!

You might say that’s a good thing. The Ministers over there do think it’s a good thing. The net result of that is there are limited options for sales of these large properties who are very indebted, and the risk with that is it gets transferred across the whole sector in a loss of value. So we’re happy to support this. It is a way through, and early intervention is always a good intervention. We’re happy to support this bill.

Thank you, Mr Speaker. Yes, it was correct: as the previous speaker said, I was settling in for a 10-minute speech and giving it a good go, but in the meantime, everything has been said. So, on that note, I commend this bill to the House.

Bill read a third time.