By Boyd Champness

THE Australian Reserve Banks decision to increase official interest rates by 0.5% could mean losses of A$100 million (40m) to the farm sector and reduce Australias export competitiveness, warns the National Farmers Federation.

The NNF said the farm sector will be forced to pay up to A$100 million in extra repayments to service a A$20 billion debt as a result of the Reserve Banks decision to raise official interest rates by 0.5% to 5.5%. The increase comes after a 0.25% rise in November.

Apart from pushing up loan repayments, the interest rate rise will also prop up the Australian Dollar, making exports more expensive to overseas buyers, the NFF warned.

The US Federal Reserve raised its key interest rates by 0.25% in an effort to slow the US economy, but Australias Reserve Bank saw fit to go the extra mile and increase rates by 0.5%.

According to the Stock and Land, the latest rate rise will increase payments on the average farmers A$163,100 debt by A$815 a year to A$8970 (3550) a year.

NFF president Ian Donges told The Weekly Times the Federal Government needs to be very careful shifting the gears on Australias economy as rural areas are performing poorly compared with Melbourne and Sydney.

“Australias current economic strength is largely centred around major capital cities, where the service and information technology sectors are showing strong growth,” he told the newspaper.

“However, agriculture and rural and regional Australia are not doing anywhere near as well, and policy makers should bear this in mind.

“Any decision on monetary policy will translate through to the rural and regional centres which depend on agriculture for their economic health.

“Even for the better performing agricultural commodities, average profit margins are expected to remain low, and the decision will lead to a further deterioration.”