Bills

Farm Debt Mediation Bill

Second Reading

Adjourned debate on second reading.

(Continued from 19 June 2018.)

Mr TEAGUE (Heysen) (11:26): I rise to continue my remarks. For those who were following the debate, I refer you to the commencement of my remarks some time ago now, on Tuesday of this week. I continue my remarks, as I indicated at the outset, that this is a commitment that we have made and, by the good work of the Minister for Primary Industries and Regional Development, the bill was introduced on 6 June. It is yet another fulfilment of the pre-election program of the new Marshall government and yet another step in the right direction insofar as ensuring that we are bringing the focus back onto the good work and livelihood of those who live and contribute to the regions in our great state.

The Farm Debt Mediation Bill 2018 is a practical step to help farmers and the institutions with which they interact to have an opportunity to de-escalate and reduce an otherwise dramatic threshold, and circumstances usually of high stress, and have a means by which they can get around the table and hopefully work towards resolution in circumstances where otherwise the means of resolving difficult situations may have been hard to find.

We must bear in mind that, when we are talking about farm debt mediation in the contractual sense, we are often talking about circumstances in which the nature and the power of the bargaining position of the two parties could not be more disparate. Often we are talking about an individual or a family who, by dint of the nature of credit regimes, find themselves dealing with one of the top 10 publicly listed companies on the ASX and the bargaining power is dramatically different.

Moreover, we are dealing with circumstances in which such an individual or family is engaged in a credit arrangement where, by the nature of farming enterprise, what is tied up in the document is not just a business enterprise but also the family home, the family's identity and livelihood and, in many cases, the identity of the individuals concerned going back over a whole lifetime, or indeed over multiple generations. So it is a special kind of credit arrangement we are considering that usually involves much more than pure commerce.

I invite honourable members to reflect on perhaps the analogous circumstances of the importance of the credit contract that governs the obtaining of the family home, and how loath we all are to find ourselves in circumstances where the family home may be at risk. If one extrapolates out the sort of stress that brings about to a farming situation, we have not only the family home but also the family's enterprise and identity. Those are the circumstances we deal with in looking to provide a means for regularising the mediation of farm debts in these circumstances.

The bill provides for a formalised access to a mediation process in the interests of both the creditor and the farmer. It ensures that the farmer has certain rights in relation to ensuring that a mediation occurs if that is the farmer's wish, that the credit provider is brought to the table and that both parties participate in the process in good faith. In my earlier remarks, I described this in terms of it being a welcome introduction of a practical circuit-breaker, a step or a series of steps that one might hope would lower the temperature, lower the stakes and ensure that, rather than dealing with just the risk of foreclosure and all the precipitous and dramatic outcomes that result in those circumstances, there is a means of engaging with and attempting to resolve these difficulties in the context of a mediation.

I refer to remarks I have been quoted as having made in the recent edition of my local newspaper, The Weekender Herald of 14 June 2018, by extension to amplify those sentiments. The Weekender Herald reported, at pages 1 and 17, comments made by me and by the member for Kavel in welcoming the practical nature of the regime this bill will bring about. I refer and commend that article to honourable members, and I am sure that there has been other relevant discussion in the press more broadly.

The regime that is the subject of the bill is very approachable and provides a step-by-step structure much in the nature of terms of a contract that might otherwise be included when commercial parties are dealing with each other and looking to incorporate workaround measures so, where there are commercial parties dealing with each other, establishing a relationship under which there are certain deliverables. The parties would well regard it as being desirable and sensible that if anything were to go wrong in those commercial dealings along the way, there be workaround measures in place to ensure that they do not throw the baby out with the bathwater but, rather, they explore all opportunities to keep the relationship on foot and to keep the terms of the commercial dealing in place.

This is no different. This deals with the special circumstances of a farm credit arrangement, but it really just ensures that it treats the parties as being parties to a relationship that is robust and ought to be able to be brought to a human level of people sitting around the table and working through issues that may emerge. What does the bill provide for? The bill importantly introduces a substantial role for the Small Business Commissioner in bringing about the mediation that is provided for in the legislation.

Honourable members may be aware, and bear in mind as this regime is now rolled out, that the Small Business Commissioner will be called upon to assist parties in identifying a mediator, in facilitating the mediation process, and in being an arbiter in relation to whether or not the mediation has occurred in a good faith manner. Ultimately, the commissioner may be called upon in determining whether or not certificates should be issued, vis-a-vis whether or not the mediation has occurred as required, and in determining practical matters such as the cost and nature of the mediation process.

The Small Business Commissioner will have an important role. In my experience of these matters in a commercial context, I observe that it is a welcome development to have a Small Business Commissioner role, in that it is so often the most difficult step to get the parties around the table in the first place, so to have a means by which that can happen in an ordered way—the subject of the legislation—is a welcome development. I understand from my discussions with the minister that not only has this been the subject of widespread consultation but that both sides very much welcome having this means of being able to lower the temperature, provide a circuit breaker, and in this regularised way, via the Small Business Commissioner, having a means of bringing parties around the table.

The bill will provide important safeguards in the interests of farmers. It will prevent the creditor from taking enforcement action without having entered into the process for mediation. It will allow a farmer to take steps to seek prohibition of any such action in the absence of those steps having been taken by the creditor, and it ensures that both parties are brought to the mediation table. What is inherently a matter that relies very much on the good faith of parties—that is, a mediation process—can be taken so far. It can be taken to the point where the parties are airing their concerns in a good-faith manner and are doing so in a timely and orderly way. That is what the bill sets out to achieve. Beyond that, a mediation is what it is.

The parties participating in good faith have no guarantee that the mediation will necessarily result in an outcome that all sides are delighted with. The reality is that often a successful mediation is one in which there has been a serious attempt to compromise and both parties leave the mediation somewhat unhappy with an outcome that is not entirely what each party would have sought. Importantly, if the mediation is given the chance to occur—and that is very much what this bill does—and if parties participate in good faith in a mediation, knowing that the result of an unsatisfactory outcome or the failure of the mediation is in these circumstances potentially precipitous, then there is a powerful set of incentives for both parties to participate constructively in the process, and that is what this bill does: it brings parties to the table and ensures that the process occurs.

In the short time that is available to me, I want to reflect briefly on the very serious nature of the circumstances with which we deal. We all know that situations of financial distress in a farming context often have resulted in very serious and sometimes tragic outcomes, none of which anyone would wish to contemplate or would wish to bring upon anyone. In my observation, that sometimes occurs because of the absence of the possibility for dialogue, because of the absence of the possibility for sitting around the table and attempting to mediate. This bill addresses that, I hope, in relevant ways. I commend the bill to the house.

Mr HUGHES (Giles) (11:43): I rise today to indicate our support for the Farm Debt Mediation Bill. It is a good incremental step forward. I know there has been a little bit of history around this bill. It was bowled up to the house on previous occasions as a private member's bill. Going back and looking at the debates at the time and some of the internal advice, it was actually a close-run thing as to whether or not we supported the bill while in government. My view is that it represents a step forward. The position at the time was that there were a number of processes in place to assist our farmers who were facing serious financial circumstances.

Of course, we have the rural financial counsellors who provide independent and confidential advice for farmers. That is an incredibly worthwhile initiative. We also have the South Australian Farm Finance Strategy and the Farming Industry Dispute Resolution Code under the Fair Trading Act, so there is a bit of a framework there to provide support for farmers who are experiencing financial distress. However, I think this introduces a new element, a very worthwhile trigger, when it comes to ensuring that farmers can make use of mediation services.

A creditor in correspondence with a farmer is required to indicate that mediation is available. The member for Heysen has, in a detailed way, discussed the steps that are available under this bill should it be enacted and, of course, it will be. I think it is good that the Small Business Commissioner has carriage of this particular act because, in my dealings with the Small Business Commissioner regarding companies that have been in distress in my community in Whyalla, he has played an incredibly valuable role. I have absolutely no doubt that, with this additional responsibility, he will carry out that role in an exemplary fashion.

This brings South Australia into line with some of the other states. Queensland, New South Wales and Victoria now all have similar legislation. There is a desire at a national level to harmonise our legislation when it comes to farm debt and assisting our farmers. I understand that Western Australia is also looking at introducing a similar piece of legislation. The feedback from Victoria is that it has been a very worthwhile initiative in that state. I think something like 95 or 96 per cent of mediation processes entered into have been resolved in a satisfactory manner. There are a number of positives there.

I think it is entirely appropriate when we look at the farming sector contribution. There are over 9,300 farmers in this state, and they have made an enormous contribution over the years. Of course, we stand on this green carpet that partly reflects the longstanding, sustainable financial and social contribution that farming has made in South Australia.

The Hon. D.C. van Holst Pellekaan: We should probably have a brown one, Eddie, a sort of ochre.

Mr HUGHES: Yes, a few minerals would not go amiss. It is worthwhile reflecting in more detail upon the primary industries scorecard for the last year full figures were available. The gross food and wine revenue increased in 2016-17 by $1.33 billion. That was a 7 per cent increase on the previous year. The trend over the last 1½ decades has been, on a trend basis, about 3 per cent of growth a year. That additional contribution in 2016-17 made record levels of South Australian gross food and wine revenue, just under $20 billion a year.

I will not go into further detail on that but, when we look at the over 9,300 farmers and the fact that most of the farming sector is still family and small business based, we get an idea of the contribution made. Because it is family and small business based, the member for Heysen spoke about the special circumstances, if you like, that apply. It is not just a business: it is also a lifestyle, the family home and also, in many cases, continuity over generations. The feeling of stress when people are facing difficult circumstances would be incredibly deep and, as the member for Heysen has said, would sometimes lead to incredibly tragic outcomes.

I recall the last time there was an extended drought on Eyre Peninsula and the difficulties a lot of our farmers ran into at that time. Fortunately, to a degree—although it did not entirely mitigate or go anywhere near to entirely mitigating—at that time we had the growth of Roxby Downs through Western Mining and a lot of our farmers on Eyre Peninsula ended up, while holding onto their farms, going to work in Roxby Downs. It probably explains why the Labor Party have never done all that well in Roxby Downs until, I would have to say, the last election, when we had a resounding victory, and I am hoping that is going to continue.

Sometimes mining and agriculture are painted as being in conflict. In some particular circumstances, that can be the case, but they are often complementary and give farmers the opportunity to earn off-farm income. Indeed, over the years a number of our farmers have also worked in the Middleback Ranges, just outside Whyalla.

This is a worthwhile step forward and it is why we on this side have no hesitation in supporting the bill. I think that in some ways it demonstrates the strength of our parliamentary system, that over time its views can change on the basis of argument. Views can evolve. There might at times be good reason not to support something, but sometimes, with fresh insight or a change in circumstances or the opportunity to more deeply consider the arguments that have been put, you do get that evolutionary change and you do get that incremental change.

It is one of the strengths of our open system of government, that for all the negativity out there directed towards politicians, which we need to more fully address, in a decent parliamentary system there is going to be overlap—and sometimes very significant overlap—when attempting, through debate, to do the right thing by our communities. With those few words, I commend the bill to the house and acknowledge the work done by the government. I think it is a positive step forward.

Mr BASHAM (Finniss) (11:52): I would also like to thank the Minister for Primary Industries and Regional Development for bringing the bill to the house. I think this is a great bill, as committed by the Marshall government. To introduce the Farm Debt Mediation Bill in the first 100 days shows the importance of the bill and how it is needed to support our farmers.

Currently, South Australian farmers have no mandatory farm debt mediation process. This means that farm operations can be forcibly foreclosed by a bank without any formal negotiation. For a farmer, that is the most confronting thing to have happen to them. Not to have that control and ability to have some influence on their direction going forward can break many people, and I think this is a great opportunity to give them some control back into the process.

If the bill passes, it will provide some protection and financial security for those farmers going forward with that slight increase in control. As the member for Giles just stated, having the Small Business Commissioner as the person responsible for the management and administration of the scheme is a wonderful way to go. The work he has done for other small business sectors is also commendable, and I think this will be another key plank in his ability to deliver.

The key elements of the proposed debt mediation framework are to provide protection and finance security for farmers by enforcing a mandatory mediation process before a creditor is able to foreclose on the farming operation. It puts South Australian farmers on a level playing field with their Eastern State counterparts and ensures that farmers have a moral in place that they can rely upon in difficult financial circumstances. It can help farmers in financial difficulty to overcome such difficulties, re-establish financial viability or exit the industry with a minimum impact on the farmers themselves and their families.

This is also very important, as both the member for Giles and the member for Heysen have pointed out, because farms are often the homes of the people we are talking about, and they can be long-term generational homes. I come from a family farm. My family has been continuously farming in South Australia for 175 years, and dairy farming for 170 of those. Lots of businesses like ours have gone through stresses at different times in their operation. There is huge emotional and mental stress that results from the pressures of when things go wrong financially. To have a little bit of control put back into the process certainly helps to actually work out how to move forward.

In my roles in the dairy industry over the last 12 years, I have encountered three significant events in the history of the dairy industry that have put enormous pressure on farmers. The first event was the Millenium Drought, particularly during 2007. The pressures that were forced onto farmers during that time saw a mass exodus of farmers along the river as they lost the ability to irrigate, and we saw an amazing pressure right across the dairy regions of South Australia. It is the only time in history, I believe, that all the dairy regions of South Australia were actually drought declared. We saw the Mid North, the Fleurieu, the river and lakes and the South-East all drought declared. That sort of impact on their business is outside the farmers' control: they do not expect to have the one in 100 years drought come and hit their business.

So the need for some ability to have some control back in the process going forward, after having been hit by something like that, is important. The issue was that we had that in 2007 and then we had another significant hit to the industry in 2009. That was when Warrnambool Cheese and Butter, a company in Victoria that was collecting significant amounts of milk in South Australia, dramatically dropped their prices on 1 April of that year. That saw complete and utter panic by many farmers: they laid off staff immediately, etc., trying to get their businesses back under control because of the significant impact on their business.

Fortunately, because of competition in the industry, that severe impact did not last. There was enough pressure on that business to reverse those decisions within a week, and they were able to rebuild that business and look after those farmers, going forward, by changing other things within that structure, rather than passing it through to farmers. Again, that put enormous pressure on businesses. Through these three events that I am talking about, I personally saw farms collapse and end up being sold, which was very unfortunate. However, I have seen it done well and I have also seen it done badly. I have seen farmers really struggle with that process of having no control. I guess my really big concern in this space is the mental wellbeing of those farmers in particular. There is enormous stress when that control is taken away from them.

The third big impact in my time in the dairy industry was back in 2016 when Murray Goulburn did a very similar thing to what Warrnambool Cheese and Butter had done, again in the month of April of that year. They significantly dropped their prices in what was seen as a clawback of income from farmers. Dropping the price so low forced farmers to totally revalue their businesses and how they were going to survive going forward. Again, that put enormous pressure on those businesses.

My concern is that those three big impacts have had a significant effect on the dairy industry, and we have seen significant numbers of farmers under extreme pressure from their banks. You can cope with one of those in most businesses. You can cope with two of those in most of the businesses, but with three impacts it starts to affect many businesses trying to find a way through. So I think this is a great opportunity for us to introduce some controls and to mandate that mediation going forward.

We have seen this week prices announced across the dairy industry. We have seen significant rises from last year's pricing to this year's. We are talking increases for the average South Australian farm of probably $30,000 to $40,000 on the bottom line. That is very much going to be about whether the farm now makes a profit or not. I think we are seeing some good signals for this next year, and that will be an opportunity for some people to consolidate, particularly after the last two years of high stress involved in the industry.

Farmers need to be given every opportunity to succeed, and this mediation does that. It means that occasionally, if a crisis does come around, if we can force the banks to the table to have a conversation about that crisis, then it may be that we can find a way through that and allow those businesses to survive. We have seen similar legislation in New South Wales, Victoria and Queensland in 1994, 2011 and 2016 respectively.

That legislation has been well accepted and we have seen great success and agreements reached—90 per cent acceptance of agreements have been made between the parties. That does not mean that the farmers have not had to leave their farm, but an agreement has been made that there is a better way forward than the bank just going to shut the business down and sell it off. There are times when farms can be sold when it is more opportune to get a better price, etc. There are ways to manage the cash flow of the business going forward that may need to be taken into account. Debt mediation will allow those things to be put on the table to have a conversation about achieving.

The proposed farm debt mediation framework is very largely based on the Victorian legislation, which is considered to be flexible, less prescriptive and administratively effective and efficient. Victoria conducted a recent independent evaluation of its farm debt mediation scheme. The evaluation process revealed strong stakeholder support for the legislative framework. The mandatory nature of Victoria's scheme was considered to be a key driver of its success.

In Victoria, we have seen agreements reached with 96 per cent of all mediations held since the commencement of the scheme—well above the projected target of 75 per cent. Farmers participating in the Victorian farm debt mediation scheme feel more supported and less vulnerable than they otherwise would have if the scheme did not exist.

By introducing this bill, the government is responding to the farmers' requests. Certainly, in my role in the dairy industry, it is something that I have pushed for in my advocacy roles previously. This is something that we needed to achieve on a national scale—not just here in South Australia but right across country—to make sure the opportunity is there for all farmers. Certainly, the approach that has been brought to the house by the minister brings us in line with the Eastern States and the federal commitment.

There has been much said about a move to corporate farming, but we still see at the heart of agriculture those individual family businesses that support the industry. The health of the industry is good, but we do get hit by droughts, as we are seeing across the Eastern States at the moment. We have to be aware that these hits affect our industries in agriculture generally, but we need to make sure that it does not necessarily mean the end of individual businesses if we can help it.

We have had announcements from the federal government recently, increasing support for families and making sure they can put food on the table, etc. to get through the drought in the Eastern States at the moment. We still need those sorts of things as well as giving the opportunity so that if things go particularly badly in the financial sense, we can help them right to the end.

There are so many things that affect the viability of a farm business, and so many of them are out of the control of farmers. My personal ethos in managing my farm is: only worry about the things I can control. I cannot control when it rains, but I can control what I do when it does rain. To me, that is the way to give those farmers the strength to be able to run their businesses and to give them as much control as possible over things so they can keep their businesses functioning.

We cannot control market fluctuations and we cannot control exchange rates—there are many things out there that we cannot control—but to have the opportunity to give back some control to farmers when things are at their worst certainly empowers them to deliver the best outcome for their families and their business, and the best outcome for the state is to allow those businesses to continue. This bill is an important step in the right direction, and I commend it to the house.

Ms BETTISON (Ramsay) (12:07): I rise today to support the Farm Debt Mediation Bill. I talk in my capacity as shadow minister for trade in recognition of the importance of our primary producers in the export sector. In 2016-17, 49 per cent of our total merchandise exports were from food and wine. This is an incredibly important part of our economy. It is the backbone of our economy. Of course, mining has also been there for a very long period of time, but we know that our primary producers have always played a very significant role in our international trade.

I have a soft spot when we talk about farming because I paid my way through university working as a weighbridge clerk at the Kapunda weighbridge during 1991, 1992 and 1993. It was operated by AusBulk then, which turned into SACBH after that time. I recall that I trialled the first computer that was introduced; before that we did everything in triplicate. I was seen as one of the young ones who was hired and, although the computers were not connected, we did put them online.

Farmers and primary producers are a vital part of our state's economy, and we want to ensure that they are given every opportunity to be assisted with their financial problems when this arises. The bill is about mandating the opportunity and providing assistance to farmers to have disputes referred to mediation before creditors can take possession.

Farming is a crucial part of the state's regional development, and Labor wants to ensure we provide crucial support in what can be a challenging industry. Financial situations can arise for a number of reasons: natural disasters, price changes in international markets and impacts of personal circumstances. We all know that if the unfortunate situation of sickness, death or divorce impacts farmers, not only is it the family home and the family business that are impacted but sometimes these decisions have to be made very quickly.

Of course, there is also the very complex issue of succession planning. Sometimes to contribute for access to gain residential aged care, you have to put up a bond or you might need to sell some of the farm to pay for that. That is going to be more of a challenge as we go on further. We have also seen the impact of changing farm sizes. Sometimes reducing the productivity requires changes to business practices, and we have often seen a consolidation of farm lands or a change to the individual farmer looking after their land but having someone else manage it. I think that on Yorke Peninsula we have seen quite a bit of that consolidation.

I was a resident around Kapunda, which had a big farming population, and I recall some of the key things from when I was younger, probably in the late eighties, regarding the issues around very high interest rates. We also might recall that there were some issues regarding foreign-exchange loans where people got bad advice or advice that was very risky and those loans got called in. That was a little time ago now but it had a significant impact on the area at the time.

New South Wales, Victoria and Queensland all have mandatory farm debt mediation in place, and this bill has been modelled on these other jurisdictions. As I understand, Primary Producers SA supports the bill along with the livestock sector. South Australia's Small Business Commissioner, John Chapman, is supportive of the bill and will be responsible for the administration of the act. Let's remind ourselves about Labor's role in the office of the Small Business Commissioner. We established that in 2011 to give small businesses a voice and an advocate to help them through tough times, disputes and compliance issues.

Since its operations began in March 2012, thousands of businesses have been provided with assistance in dispute resolution, including mediation and representation. I am very proud that we have introduced this office, not just for farmers but across the board. I remember franchisees had some issues that they raised with us as well, so that was established back then. The Small Business Commissioner will be responsible for the administration of the act.

The mandatory mediation procedure sets out certainty to farmers. It gives them guidelines and protection. Once a farmer has been served with a notice, they have 21 days from the date the notice was given to notify the creditor that the farmer requires mediation. A farmer who is liable for debt may request mediation. A creditor who receives a request for mediation from a farmer may, by notice given to the farmer, agree or refuse to participate in mediation. If the creditor refuses to participate in mediation with a farmer, the farmer can apply to the Small Business Commissioner for a prohibition certificate preventing the creditor from taking enforcement action against the farmer for up to six months.

Small Business Commissioner John Chapman must make arrangements to facilitate the resolution of a farm debt dispute by mediation as soon as notice is received that a farmer and a creditor have agreed to participate in mediation. The commissioner has advised the shadow minister for regional development that the bill requires uniformity. He talks about the fact that after it was introduced in Victoria, 96 per cent of cases reached a satisfactory outcome.

The mandatory aspects of the bill set out clear points on the issue at hand and give farmers a clear opportunity to present and discuss the case. My husband is currently studying financial counselling, and if there is one thing that is very clear when we have had constituents come to us it is that the sooner the better you address the situation, things can be resolved. But what we tend to do, and this is human nature, is ignore it or hope it will go away.

One of the key things here is that we encourage people to seek out other forms of support and to find out the different avenues that can help as well. It gives farmers a clear opportunity to present and discuss their case and, while the 21 days' notice is still limited, it gives time for action and advice. I recognise that this is not the only area of support but is in addition to the voluntary South Australian Farm Finance Strategy and the Farming Industry Dispute Resolution Code, which is under the Fair Trading Act.

When we were in government, from time to time we were called upon to help different parts of the sector, and I want to recognise the former primary industries minister Leon Bignell for his role when, in 2016, he provided immediate support for the state's dairy farmers when they suffered a severe cut in milk prices. The funding from the Labor government was invested in the Taking Stock program, which allowed farmers to meet with a consultant to have their financial situation assessed and to develop a financial plan, as well as be provided with general business advice and mental health support. While we support this legislation today, it is not everything we can provide for farmers when they have a need.

There are two other things I want to talk about. In 2016, when the member for Hammond spoke about this bill that was brought in as a private member's bill, he praised the work of the rural financial counsellors and spoke quite passionately about the Rural Financial Counselling Service. I commend him for that. He said that it was a voluntary service but that its service was quite limited and that only 25 per cent of farmers in South Australia used it.

Based on these comments and on the excellent work undertaken by the not-for-profit Rural Financial Counselling Service, I call upon the minister and urge him, along with the member for Hammond, to give a significant funding boost to this vital service. While it is good to have this legislation, we need to build support around it. I do not know what the funding is now, but I propose to the minister that we increase it.

My final point is to request an evaluation, that you might consider accepting it as part of the bill—I understand Victoria recently did the evaluation and received 96 per cent—and that we have it within the bill and have a review clause in three years' time.