Dr Bollard backs Federated Farmers on interest rates call

“The 150 basis point cut will be welcomed by farmers, but only if the banks play ball and pass this large cut onto their business customers,” says Philip York, Federated Farmers economics spokesperson.

“The Federation applauds Dr Bollard for not just restating, but toughening his language for financial institutions to pass on cuts in the Official Cash Rate (OCR) to customers.

“We see his statement reflect the results of a Federated Farmers survey on farm business overdraft interest rates supplied to the Reserve Bank last week. Given the OCR has been cut by 4.75 percent since last July, the banks are potentially blunting the stimulus the Reserve Bank has given the economy.

“Today’s bigger than expected OCR cut also follows hard on the heels of Fonterra’s announcement yesterday, that it is not just reducing, but restructuring the way the payout will come to its supplier-shareholders. This will see a number of dairy farmers having to arrange or extend their overdraft facilities.

“That’s why the full 150 basis point cut in the OCR must be passed onto farmers and businesses in general. This would lessen the immediate and wider economic impact of this lower revised payout, as well as the way this payout will be structured.

“Given Dr Bollard’s press conference comments on bank balance sheets and margins, it is clear the banks have looked after themselves. It’s high time for the banks to now look after their farm business customers,” Mr York concluded.