AgriStarter Loan greatly undersubscribed

The federal government’s $75 million loan designed to help new farmers into the property market is yet to take off.

A federal government loan designed to help new farmers into farm ownership is yet to take off, with less than half of the $75 million scheme allocated since it was launched almost two years ago.

The federal government’s Regional Investment Corporation approved 21 AgriStarter Loans totalling $19.1 million in the 2021-22 financial year. This follows the approval of 12 loans worth $7 million in total in the previous 12 month period.

By October this year, the scheme was still greatly undersubscribed, with a total of $34.1 million worth of loans handed out.

Agriculture Minister Murray Watt critisiced the National Party for boasting about the millions in funding they announced to help farmers, “but the reality of the money hitting the ground was often very different. As usual with them it was all about the announcement and not about actually helping people”.

Minister Watt said the appointment of the RIC’s new chief executive John Howard on Monday “would bring a fresh set of eyes to the organisation”.

The AgriStarter Loan was created to help young farmers purchase their own farm.

The scheme was announced by the Coalition during the 2019 election campaign to assist new farmers to buy their own farm by offering loans of up to $2 million tied to the RIC’s variable interest rate, which is competitive with the major lenders.

The rollout of the scheme was delayed to allow the RIC to process thousands of drought loans worth more than $2.6 billion between 2019-20 and 2020-21.

It was eventually launched in January last year and then its eligibility broadened in April this year to include share farming and farm leasing to recognise these popular pathways into farm ownership.

RIC spokeswoman Melanie Monico defended the scheme that she described as one of the organisation’s most popular.

But she said interest in AgriStarter Loans didn’t always eventuate to approval because applicants need a commercial loan for half of the capital required and demonstrated farming experience.

“Individual financial circumstances may also rule out some customers early in the process. We find that the AgriStarter loan can be a conversation starter to engage the family in developing succession plans. This process can take many years, yet the loan’s availability may help families to start thinking about their own process,” Ms Monico said.

LAWD Senior Director Danny Thomas says farmland values didn’t tend to drop, but could plateau.

Some property analysts have blamed the soaring cost of farming land for keeping new farmers out of the market.

According to Elders research, the national median price of a hectare of Australian farmland increased more than 11 per cent to $8158 in the three months to June 30 alone.

But rural property specialist Danny Thomas, of real estate agency and advisory firm LAWD, said agricultural land values didn’t tend to drop, but could plateau.

“Anyone who feels priced out will stay priced out,” Mr Thomas said. “Once a district average has been established, there has to be something cataclysmic to draw that back. So they’ll be waiting a long time for that to happen.”

Mr Thomas said the low take-up of the AgriStarter Loan could be due to its similarities with the major banks.

“If you’re with a bank now that’s backing you, what’s the incentive? It’s just an alternative source of capital and there are lots of non-bank lenders who are administratively easier to deal with than the banks as well.

“Maybe if things get tougher as rates increase it will find its place, but through a time of high liquidity there’s been no incentive for people to take it up,” he said.