Regional Investment Corporation (RIC) loans have been around since 2018.

They were designed to provide lower interest rate loans to rural and regional businesses, and, from my perspective, they have generally lived up to their promise.

It is arguable that the loans are no longer fit for purpose, particularly the rate.

The current RIC interest rate is 5.18 per cent, and this is not far below the standard bank interest rate for a solidly performing agri business.

As the cash rate continues its downward trajectory over time, it is likely that for some farming businesses the RIC interest rate will be higher than a commercial bank rate.

Of course, it is easy to simply compare RIC rates with theoretical commercial bank rates.

As any farming business knows, not every operation pays the same interest rate.

Commercial banks risk-grade all agri customers.

The higher the risk, the higher the rate.

Add into the mix competitive tension between banks, particularly where brokers are involved, and you end up with a broad range of interest rate spreads.

Part of the issue for the disparity, as I see it, is that RIC prices its rates based on the 10-year Australian government bond rate, whereas commercial banks base their pricing on shorter funding cycles.

Banks have been doing it this way forever, and it is a time-tested, prudent methodology.

Given the season in southern Australia last year, there have been calls for no-interest or very low-interest loans.

The government seems to have put this back into RIC’s hands with extra funding.

The pros and cons of providing these ultra-low/no-interest loans are a complex topic.

For some businesses, it can be a lifeline; for others, it prolongs a long-term downward erosion of equity.

One of the issues I see in handing this back to RIC with extra funding is that it puts it back into the court of the commercial bank.

RIC can only fund up to 50pc of total lending, and the incumbent bank must be supportive.

This causes another issue for the commercial bank, as post-banking royal commission, the banks must adhere to the responsible lending regime.

This requirement can sometimes put the bank in an invidious situation, as it may want to support the business but may run afoul of the legislation.

It is a fine line sometimes.

Governments seem to operate at a glacial place, and, to be fair, I think sometimes it is hard to work out what the best use of taxpayers’ money is.

Everyone has an opinion one way or another.

Everyone in agriculture realises and accepts that seasonal conditions and commodity prices are variable, but the climatic conditions that prevailed in 2024 and the start of 2025 were extraordinary, and these circumstances require extra consideration.

One way for RIC to become competitive is to price its loans comparably with commercial banks.

RIC will always have access to lower base funding, as the government can borrow at materially lower rates than banks.

From my experience, the interface between banks and RIC does work well, but it is clear the funding model for RIC loans needs overhauling.

This can be done if there is political will.