New NAB data reveals strong growth in farm deposits driven by a strong economy and rising interest rate environment.
NAB’s FMD season saw a 29% increase in sales volume in the year ending June 30, 2022.
FMD accounts allow primary producers to make tax-deductible deposits in profitable years and withdraw them in difficult years.
NAB Executive Regional and Agribusiness horn khan Agribusiness said it was taking advantage of favorable conditions to build resilience in its business.
“The increase in FMD can be attributed to a variety of factors, including excess liquidity in the deposit system, coinciding with the initial rise in interest rates as part of the current rate hike cycle,” Horn said.
“This also reflects growing interest in term deposits as NAB clients seek better returns and certainty in a volatile interest rate environment.
“The landscape has changed significantly over the past year, moving from an ultra-low interest rate environment to a rising interest rate environment, with the RBA raising cash rates ten consecutive times from 0.10 per cent to 3.6 per cent.
“At NAB, we have observed a shift from transactional or at-call accounts to term deposits.
“This trend is likely to slow as interest rate differentials between term deposits and at-call contracts narrow.
“From the bottom of the cycle to now, total term deposit volume has increased by 80%.
“Given strong growth in 2022, growth in the total business deposit (excluding financial institutions) system has slowed in recent months, suggesting that higher interest rates and rising costs of living may be reducing liquidity. is showing.
“Agribusinesses are already considering and using tax-effective FMDs as part of a well-thought-out tax plan and to build resilience in their businesses, and as the financial year ends, FMD balances will increase. expect to increase.
“Foot-and-mouth disease usually spikes in the June quarter, but this is largely due to tax planning, and we encourage tax planners, financial Discussions with advisors and bankers are generally recommended.”