Farm Debt Mediation Bill

Second Reading

Adjourned debate on second reading.

(Continued from 2 December 2015.)

The Hon. J.S.L. DAWKINS (20:41): I rise to support the Farm Debt Mediation Bill 2015, introduced in this place by the honourable Leader of the Opposition. I myself have recently been contacted by individuals in the primary industries sector, who have expressed their opinions of the need for such legislation. One of those was Mr Charlie Goode, who is a very experienced rural financial counsellor from the South-East, but who has worked all over the state and worked considerably in the Northern Territory at the time of the ban on cattle exports to Indonesia. He is also well aware (given the proximity to the Victorian border of where he comes from in Naracoorte) of what happens in the Eastern States.

This bill will create a legally enforceable bank mediation mechanism for primary producers. A similar legislative framework is currently in place in Victoria and New South Wales. South Australia currently has no legally enforceable or compulsory bank mediation processes for primary producers. Currently, only two debt resolution facilities exist for farmers, being the Financial Ombudsman Service and the voluntary South Australian Farm Finance Strategy, which was originally written in 2007. This strategy is not legally enforceable, as it is essentially an agreement between financial and primary industry parties to provide access to independent advice for farmers, early recognition of financial problems, resolution of financial issues via negotiation and voluntary mediation.

In contrast, the legislative mechanisms available to primary producers in Victoria and New South Wales provide for an efficient, equitable and legally enforceable resolution to farm debt disputes. In fact, mediation is required before a creditor (generally a financial institution) can take possession of a property, or take some other enforcement action, under the terms of an unpaid farm mortgage.

As an example for the council, the New South Wales legislation ensures the following process takes place when financial hardship befalls a primary producer: firstly, the creditor must not take enforcement action against a farm mortgage holder until 21 days have elapsed and the creditor has given notice to the mortgagee indicating their intention to take enforcement action, and the opportunity for the holder of the farm mortgage to engage in mediation. Secondly, the farm mortgage holder then has 21 days to notify the creditor that they wish to take up the option of mediation. Thirdly, if the farm mortgage holder has given notice of their intention to utilise the option of mediation, the creditor must not take any enforcement action, unless an exemption is granted. Fourthly, if the creditor refuses mediation with the farm mortgage holder, the farmer may apply for a certificate of exemption from enforcement action.

The acts also establish the processes and functions of the meditator, their selection, rules regarding the representation of the parties, and the evidence which may be tendered during the mediation, as well as rules regarding any agreements which may come out of successful mediation. While there are slight variations between jurisdictions on the operation of these schemes, they have both proven to be extremely valuable to the primary industries sector.

A report into the operation of the act in New South Wales has found that 72 per cent of farmers utilising mediation with creditors reached a settlement. Of these settlements, 37 per cent of farmers refinanced their debt, 27 per cent of the creditors gave the farmer more time to pay their debts, 23 per cent of farmers' creditors paid off part of the farmers' debt, and 60.7 per cent of farmers felt positive after engaging in farm debt mediation, compared with just 17 per cent who felt negative.

Furthermore, the report stated that the majority of farmers and their overwhelming majority of creditors would engage in and recommend the use of farm debt mediation in the future. This shows why a compulsory system, as the one proposed by this private member's bill, would be far more beneficial to farmers than South Australia's current involuntary arrangement. The state's current system provides for no legal obligation for the financier to engage in mediation with a farmer before taking enforcement action. This bill will legally insert this step into the enforcement process, giving farmers an opportunity to find a satisfactory outcome with their creditor before potentially losing all they have worked for.

I have noted that the federal Minister for Agriculture and Water Resources, the Hon. Barnaby Joyce, indicated at an industry round table in September 2014 his intention to take a national approach to farm debt mediation. While I am encouraged by this announcement, I still believe it is important for this parliament to take strides to provide the financial security this bill will create for primary producers across South Australia. I look forward to further debate on this bill in the new year and hope we will soon see a farm debt mediation scheme much like those already in place in Victoria and New South Wales operating soon in this state.

To emphasise that, I suppose a number of years ago when there was significant drought in this state and there were a lot of farmers under financial stress, I and other members of the Liberal Party parliamentary team met with a number of senior bankers, and there was a lot of sympathy for the voluntary methods that have been described. In some cases that worked very well. Unfortunately, any major business, major companies like banks, change their CEOs, change their regional managers, and sometimes when someone new came in from Sydney or somewhere else they were not as sympathetic to some of these measures, so I think that is why we need to go down the line of a compulsory mediation scheme. I commend the Hon. David Ridgway for moving this bill and commend the bill to the council.

Debate adjourned on motion of the Hon. T.T. Ngo.