Murphy banks on equity - Weekly Times Now

JOINT-FINANCE could help young farmers build equity and provide a market for retiring farmers looking to sell.

Victorian Nuffield Scholar and Dumbalk North dairy farmer Damian Murphy presented his scholarship findings to the Nuffield Australia conference at Toowoomba, in Queensland, last week.

It included a detailed proposal that drew money from farm management deposits and retired farmers' investments to help fund loans for farming's next generation.

"There has been lots and lots of talk about something like this, but nobody has come up with something tangible," Mr Murphy said.

Sponsored by the Gardiner Foundation, Mr Murphy travelled throughout the EU, US and Canada looking at how young farmers obtained finance.

He returned with a proposal for a Future Farmers Fund which would draw on two sources of money: a percentage of Australia's farm management deposits ($3.1 billion at July) and funds from retiring farmers - encouraged to invest with tax incentives and a return (combined with incentives) to equal superannuation returns.

Under the plan, Future Farmers Fund deposits would be guaranteed by the Federal Government, but banks would apply to this fund for additional money for a stage one farmer - one with assets such as a herd - or a stage-two farmer - with property assets looking to build equity.

"For example a stage-one farmer has got 20 per cent (equity) and they need 40 per cent, the bank can apply to the (fund to) get the extra 20 per cent," he said.

A business plan would still be required and the bank would have first mortgage with the fund taking out a second mortgage.

Mr Murphy said fund administration wouldn't be costly, as the banks would provide most of the "background work".

This plan also involved a concessional interest rate, provided by the banks, which would be set to a training scheme.

This would promote a learning culture in agriculture but also try to close the increasing divide between the Australian land price per hectare and the total cash receipts per hectare or the amount of money that can be made from a farm, Mr Murphy said.

This system would allow farmers at all stages of their career to move forward even if they didn't want to own land, he said.

Nuffield Victorian chairman Michael Hastings said Mr Murphy's presentation was timely and addressed a fundamental issue.

"I have no doubt some of the more progressive (financial institutions) will enhance his ideas," Mr Hastings said.