The scheme was introduced in 2019 under the Farm Debt Mediation Act and has been fully operational until July 2020.
It was designed to help distressed farmers by providing an independent, constructive and timely process for farmers to work through their debt issues and meet an agreement.
Under the scheme, secured creditors are required to offer mediation to farmers and primary production businesses when they default on payments.
New Zealand Agri Brokers (NZAB) founder and director Scott Wishart says that while the scheme is a framework that has the potential to be an opportunity for farmers and banks to engage in topics surrounding debt earlier, “the banks are using it as another big stick”.
He says the issues surrounding the scheme are not one-sided.
“There are many farmers who are not of a change mindset and who do not want to engage positively in the solutions that are required,” Wishart told the select committee.
He says that farmers and bankers “have a really, really good relationship right up until the moment they don’t”.
“Ultimately, I think a lot of bankers and the banks themselves find it difficult to start to have the hard conversations early because ultimately they worry that the farmer might leave or go to another bank or some other adverse outcome and I guess the way banks are geared up to deal with farmers that arrive into distress, the first time the farmer’s actually aware of the severity of the situation is when someone in a suit and tie turns up.”
Meanwhile, Federated Farmers commerce and competition spokesperson Richard McIntyre told the committee that when the scheme was first introduced, it was loosely modeled on the Australian scheme but it hasn’t proven to be as successful as the Australian version.
“What we’re hearing is that the Farm Debt Mediation Scheme as it’s been rolled out in New Zealand has been useful but it has not been as successful as the Australian scheme, I guess for various reasons,” he says.
“So we’d be interested in looking at that further and understanding what’s working, what’s not. Are there any outcomes or any systemic things that we could change to make it better? Because the intent behind it is really, really, really good, we’ve just got to make sure we get the outcome.”
