New NAB data reveals strong growth in farm deposits* driven by strong economic conditions and a rising interest rate environment.
NAB’s fiscal year 2022 (FY22) FMD season saw a 29% increase in FMD volume through the end of June 2022.
FMD accounts allow primary producers to make tax-deductible deposits in profitable years and withdraw them in difficult years.
Khan Horne, Regional and Agribusiness Director at NAB, said agribusiness is taking advantage of favorable conditions to build resilience into their businesses.
“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 broadly 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 the cash rate from 0.10% to 3.60% for the 10th consecutive time.
“At NAB, we have observed a shift from transactional or at-call accounts to term deposits.
“This trend may slow as interest rate differentials between term deposits and at-call contracts narrow,” Mr. Horn said.
“From the bottom of the cycle to now, total term deposit volume has increased by 80%.
“Growth of the total business deposit (excluding financial institutions) system has slowed in recent months, acknowledging strong growth in 2022, and rising interest rates and rising costs of living may have dampened liquidity. It shows that there is,” he said.
“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 it is up to June 30 to talk to tax planners, financial Discussions with advisors and bankers are generally recommended.”
Source: NAB. More on FMD available on his NAB podcast at this link.
* The Ministry of Agriculture, Forestry and Fisheries administers policies regarding FMD accounts and the ATO is responsible for tax administration.