THE Australian agriculture sector is capitalising on improved seasonal conditions and government incentives including the instant asset write-off scheme to invest in farm equipment, the latest data from NAB reveals.
Loans to NAB customers for agricultural equipment finance have increased 132 per cent year-on-year from 2019 to 2020, as agribusinesses recover from two years of challenging conditions including drought, fires, COVID-19 disruptions, and most recently, floods.
NAB executive regional and agribusiness, Julie Rynski, said the trends in equipment finance were indicative of the strength in lending and the resilience and overall confidence of the agriculture sector.
“Lending for tractors has increased 146 per cent, while lending for equipment such as sprayers and headers has risen 142 per cent,” Ms Rynski said.
“Farmers looking to boost their on-farm grain storage have also driven a 140 per cent increase in lending for grain silos.
“After a record breaking 2020-21 harvest and with subsoil moisture conditions looking good across much of the south-east and south-west of the country following summer rain, the figures are reflective of our customers’ intentions to capitalise on the turnaround in seasonal conditions.”
Irrigation, renewable energy investment
Ms Rynski said one of the biggest growth areas had been in lending for irrigation plant and equipment, which is up 217 per cent.
“Investment in irrigation plant and equipment is occurring throughout a range of production areas off the back of the La Nina event delivering more surety in irrigation water supply,” she said.
“Farmers are also investing in energy efficiency practices and technology to generate renewable energy, with lending for on-farm solar power infrastructure increasing 142 per cent.
“We expect investment in that category will grow further as our customers continue to focus on sustainable agricultural practices and also look to save on energy costs.”
Ms Rynski said with the end of the financial year approaching, agribusinesses were making the most of the Government’s instant asset write-off scheme to buy new machinery and make other on-farm investments.
“The instant asset write-off scheme applies to eligible assets used or installed by the end of June next year, so there is still a good window of opportunity for farmers to capitalise on the scheme,” she said.
“Assets which can be written off are the same as those deemed eligible under the existing depreciation rules.”
Ms Rynski said the bank did not expect current demand for equipment finance lending to ease any time soon.
“If we continue to have favourable seasonal conditions, we expect this level of investment in agricultural equipment to continue for the next 15 months,” she said.