Ross Greenwood speaks to Nationals Senator Barry O’Sullivan has slammed the banking industry as “ignorant” to the needs of farmers, saying conditions within loan agreements set up hard-working Australians in the bush for failure.
Ross Greenwood: Great to have your company here on money news right around Australia. As we told you just a little earlier, the Bureau of Meteorology today is forecasting a 50% chance of an El Nino weather event later this year. Now that’s twice the rate of normal and some parts of the country might see significant rains even flooding but many parts might also see drought. This is the weather event that caused the most significant droughts in Australia’s background. Well, a man who knows about that who has lived it firsthand himself and represents people, who themselves, are still living through it now is Senator Barry O’Sullivan who is the Queensland Liberal National Senator.
Now also Barry O’Sullivan is absolutely key in regards to the Royal Commission because he’s one of the senators who pushed the government into a position where it needed to announce the Royal Commission. Then if you consider what took place even in the past week in the Royal Commission, the behaviour of banks towards farmers pushing many of those farmers, tragic stories, off their lands, the mental pressures that they had gone through, the family pressures they had gone through then you really understand that Barry O’Sullivan is a key man to speak with right now. Many thanks for your time, Barry as always.
Interview with: Barry O’Sullivan, Senator
Barry O’Sullivan: Thank you, Ross.
Ross Greenwood: In regards to the Bureau of Meteorology and this potential weather event as I say a 50% chance so it’s not absolutely certain but they’ve said twice the expectation of normal. This will be a real worry for many people in Northern New South Wales, Queensland who have still got very, very dry conditions.
Barry O’Sullivan: Look, if it is going to take what is already a very extended, tragedy is the word now, that word is a fit for this. This will change the face of rural production particularly around beef and sheep if this happens. These people are struggling. I’ve just done two big tours through the west all the way at the Boullier and back through and talked to many, many producers. Some of them haven’t had rain from the sky for nearly four years. They’re surviving on some of the flood throughput that we get in the channel country that’s come down from rains in the north. We’re in a very precarious position with these industries. I can tell you for so many producers.
Ross Greenwood: Then you go back one step and you wonder then whether the banks, having gone through the ringer in the Royal Commission in the past weeks about the quality of their agricultural loans have learned anything at all if such a weather event does for some of these farmers into pretty dire situations?
Barry O’Sullivan: Well Ross, I’ve been very vocal on this now for a number of years even long before we were able to get the Royal Commission up and that is that there are cycles in the bush. We can put aside if you like the change in arrangements around climate. We don’t want to get caught up in that argument within this argument because it’s been well known for many, many decades. As long as we’ve been able to keep records that these events occur. If you look at for example a cycle in the bush you’re looking at 10 to 12 years and in that you know you’re going to have a couple of decent years, you know you’re going to have two or three very bad years and you’re going to have this lump in the middle which is the transition from good to bad and back to good again.
Now, what’s happened is many of the products that the banks have put out there right on the day dot, the day that people signed those particular loan agreements there were conditions or covenants in there that the banks knew that these people were going to fail. They knew it on that day and if they didn’t know it, they ought to have known it. I said in the Parliament the other day they should have read a couple of Henry Lawson poems and they had known just about these conditions in the bush.
Ross Greenwood: It’s interesting you also said the other day that many of the bankers who go out to try and value these farms or put contracts before the farmers themselves would not know the difference between a Mulga Bush and a Christmas tree yet they’re sending to try and keep thousands of stock alive and they would not even know the first way to be able to do that.
Barry O’Sullivan: Correct. We had quite a celebration. There’s dozens of cases I could give you but one was when the receivers and administrators and bank representants took over property, they had to move stock and they went to contestability situation for the transport costs. Now we know from the fact and the features in it that that should have been about five or $6,000. They paid $17,000 to move the stock. They’re just absolutely ignorant many of these people. They have got no expertise and even might I always say, Ross, a banker that grew up on the farm, dairy farm with mum and dad and left and went off the university at 16 and 17 and the bankers have chosen many of them in circumstances.
I’ve got to say and I don’t want to reflect poorly on them but they know no more about the bush. A few years growing up on a farm doesn’t make you an expert around financial literacy and market literacy around many of these enterprises. Look, the banks have failed at just about every post and now’s the time they need to step forward right now long before the commissioner comes and starts to make recommendations or we start to come up with new prudential or legislative environments for them. They need to make good if they’re going to win back the trust of the Australian people and particularly those in what I call provincial Australia, rural and remote. They need to start making good right now. Yesterday I think.
Ross Greenwood: Well we spoke last week also to a cattle farmer, had the Jamboree farm, Wendy Bro who was at the Royal Commission last week. The sad story she told us about Rabobank effectively encouraging them not only to borrow to buy that farm but then there was a situation that they found themselves in where they were encouraged, were really pleading with the bank to allow them to basically drop stock. The bank said, “No, no you can’t drop the stock because it’s under the book value.” They’re saying, “But if you don’t drop the stock now we haven’t got the feed to feed this stock. We’re going have to shoot the stock.” Eventually, I think it was that they had to shoot 2500 stock.
I think in that case the stock was worthless to them. It was a just terrible, terrible situation as to how– In fact, tell you what it wasn’t Wendy Bro, it was Debbie Viny who told us this story. The bank has now conceded they did not act ethically towards her. You get the tragedy of people who are making decisions, financial decisions that are not farming decisions and that was the problem in this case.
Barry O’Sullivan: They’re ignorant to the sector. It’s getting worse, Ross. They’re closing banks in the bush faster than you can blink. We’re losing even where you did have good rural managers, people who lived in that community, understood what was happening and had moved forward with the events of the day. They’d seen what happened in their districts and regions over months and months and years and were best placed to be able to manage these loans. We’re closing them all. They’re gone.
There’s not even a human face to work with now in cases where earlier intervention on the part of the bank and I don’t mean intervention to take over the properties but earlier intervention to help some of these people who might be a bit short on literacy. A lot of these good folk, very decent people they’re not necessarily sophisticated business managers. They’re not they’re not what we regard to as sophisticated investors. You’re well familiar with the term. I think there’s been a duty of care that the banks have failed to help them manage the circumstances, giving them much more notice to be able to go ahead.
In fact, instead of giving them advice that would help them to become more resilient about what’s obviously coming their way over the next 12, 24, 36 months they’ve gone ahead and loaned them more money, put them deeper, deeper into their problem. They’ve invested in other property trying to consolidate bigger holdings in the same district. It’s not as if it’s going to rain next door if it’s not raining on your place.
Ross Greenwood: That’s so true. Just one thing, are the greens right? Does this Royal Commission need an extended period?
Barry O’Sullivan: Well, I’ve got to tell you every time the green speak and say something in favor of farmers I break out in the cold sweat [laughs] because they’re not known for this. Look, my view about this is very simple. The commissioner is has proven himself to be first class. There’s the first thing. There’s been signals sent from the government. I said at the outset that it’ll be a very brave government of any persuasion that wouldn’t extend the time or extend the terms, broaden the terms if asked for by the commissioner. He’s best placed to know. Those signals are well and truly out there.
I think we need to leave the commissioner to get on with his job and if he needs more time or more resources, he strikes me as being a fellow who won’t frighten to say so. I think politicians should stay the out of this as best they can unless they’ve got positive contributions to make.
Ross Greenwood: Okay. One final one for you. I want to talk to you about power and power stations in particular. In April this year when Tony Abbott was calling for the government to forcibly acquire Liddell Coal Fire Power Station, you described that at the time, even now you are sympathetic to the issues in regards to coal-fired generation but you call that as socialism. Today I do know that the government is going to buy 100% and will fund 100% of the Snowy Hydro scheme. What would you describe that as?
Barry O’Sullivan: Well look, I’ve obviously painted myself into a corner there. I couldn’t change my view about that if I wanted to. But let me tell you, we’re in a very critical phase around energy in this country and I’m starting to soften on what ever has to happen to produce appropriate solutions. What we’ve got we’ve now got a sovereign risk around the investment for the private sector in relation to energy. Who would spend two bob, Ross on anything with the pace of change that’s occurring? We’ve got one side of politics saying, “Let’s paint it pink.” The other side is saying, “Let’s paint it green.”
I think there is only one way forward and that is for the government of the day to create an environment where people feel secure enough to make investment particularly in baseload power. If we get the investment signals right then it will bring down prices. Now, in relation to the reduction with the CO2, I think that that’s a fit in there but it’s not the first fit. remember I’m a senator from Queensland if you want to have a to meet, talk coal and then we’ll talk a bit more about coal and a bit more about coal again.
Ross Greenwood: Because the one thing most Australians, whether they’re in business or indeed whether they’re at home, the one thing that they want is that when they turn the lights on they want the lights to work and they want to make certain that when the lights work it’s also affordable. That’s the case.
Barry O’Sullivan: Correct. Even more significantly so if you’re relying on power for your business and there’s not a business now that doesn’t rely on a good steady reliable source of power for them to get on with their job. If we start to get massive power outages because the sun’s not shining or the wind is not blowing, we’re going to have hundreds of thousands of jobs will go by the by. People will start to operate their businesses around this intermittent supply and we can’t afford to have that. This whole shemozzle has caused us so much pain in this country, manufacturing has gone. Big in manufacturing that’s left like our smelters and big irrigators I can tell you they’re on the cusp. They’re on the cusp of doing something different because they can’t first of all rely on a reliable source of power and they can’t afford it.
Ross Greenwood: I’ll tell you it’s always a good man to have on the program the Queensland Liberal National Senator, Barry O’Sullivan. Barry, always great to have you on.
Barry O’Sullivan: Thank you, Ross. Appreciate the opportunity.
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