The latest agricultural lending statistics provided by the Australian Prudential Regulatory Authority (APRA) show an increase in lending to the farm sector of 6% in 2022-23, reaching $120.5 billion.
Executive Director of ABARES Dr Jared Greenville said that while the amount of debt had risen, the reasons point to ongoing investment in the sector.
"Farmers are taking on debt so they can invest back into their businesses.
"We're particularly seeing more land purchases, showing that the farmers who are taking on higher debt are expanding their businesses.
"The risks of taking on this debt are more manageable as well. Rising land prices have provided farmers with more equity to support higher borrowings, while historically high farm incomes over the past few years in most agricultural industries supported farmers' ability to service debt."
The distribution of debt across farms is uneven. In 2022-23, 5% of broadacre and dairy farms (mostly very large farms in terms of turnover) accounted for just under 40% of aggregate debt, whereas nearly 50% of broadacre and dairy farms had very little or no debt.
"What is very good to see was the low number of farms in 2022-23 in financial stress due to debt," Dr Greenville said.
"For example, the proportion of broadacre and dairy farms with relatively low borrowing capacity and relatively high debt servicing commitments was just under 1% in 2022-23, compared to an average of 7% of farms over the last 20 years.
"That said, the landscape has changed since 2022-23. Higher interest rates, along with lower average farm incomes, changing seasonal conditions and commodity prices will no doubt have influenced borrowing decisions."
Trends in farm debt: Agricultural lending data 2022-23 can be read here: https://www.agriculture.gov.au/abares/research-topics/surveys/farm-debt
