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PRIME MINISTER

FOR PRESS ; V 22 OCTOBER 1978

ELECTORATE TALK

Shortly, the Primary Industry Bank of Australia will begin  processing its first applications from farmers for long term  loans i .Â·'Ã¢ÂÂ Ã¢ÂÂ . ........

The establishment of the bank fulfills a pledge by the Government  to cater for the special credit needs of rural Australia. .

Access to long term capital on suitable terms had become a  serious problem for the family farm. With the commercial market  unable to meet this need a new and unique insitituion was  required.

While the demand for credit for capital expenditure and working  capital has grown significantly over recent years, many producers -  because of depressed markets, adverse seasons or possibly both -  experienced great difficulty in increasing their earnings to the

stage where they can either finance investment from -their income  or prove themselves sound borrowers.

Denied access to long term finance, farmers often had to postpone  vital investment decisions essential to the long term viability  of their properties. They were also less equipped to ride out  those recurring periods of low market returns.

The Government realised that to provide farmers with long term  loans at suitable terms a special institution was required. The  Primary Industry Bank is the result of a long period of research  and negotiation. It combines both government and private funds

to lengthen the term of loans and reduce the interest rate.

The Board of the Bank brings together people with wide experience  in financial and agricultural policy fields and in farming itself.  The two farmer representatives on the Board will make sure that  the interests of farmers are heard.

As announced by the Minister for Primary Industry and the Treasurer,  the new Bank will be making loans available to farmers - and I  should also include fishermen and foresters - for periods of  eight to thirty years at an interest rate of only 10.5% for loans  under $100,000. A rate of 12.5% will be charged on loans above

$100,000. The loans will be on terms and conditions considerably  more favourable to the borrower than normally available from

commercial sources.

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Primary producers will now be able to finance farm investments  on a loan term more appropriate to the expected life of the  investment-It is significant that longer term loans reduce the annual amount

farmers must put aside each year for debt servicing.

For example, the annual payment of principal and interest on  a $30,000 loan at 10.5% over eight years is $5,726. But over  20 years the annual payment is only $3,645, a reduction of  just over $2,000 a year.

The Bank will not only provide longer term funds for the rural  community but will be the means of replenishing supplies of  rural credit available form non-government sources.

Over the past ten years there has been an enormous increase in  government funding of the rural sector debt.

Currently, some $1,000 m. or 35% of rural indebtedness to  institutional lenders is covered by funds directly advanced by  the Commonwealth Government. This represents an increase in  excess of 60% in government lending since 1970, during a period  when a number of institutions - such as pastoral houses,

insurance companies and the trustee houses - have withdrawn  loan funds from the rural sector.

The Government strongly believes in providing the opportunity  for farmers to obtain their credit needs on conditions of  repayment which enable them to plan long term investment  programmes.

The Primary Industry Bank will provide this facility and by  using funds raised commercially in its lending operations the  Bank could well boost the aggregate flow of credit to the rural  sector.

I believe that, through the operations of the Bank, the family  farm will be able to look to the future with great confidence.

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