14 May 2015

Reserve Bank’s dairy warning must be heeded

The Reserve Bank’s warning that the overreliance on the dairy sector is a threat to the wider economy as well as many farmers’ futures must not be another smoke signal ignored by National, Opposition Leader Andrew Little says.

“The Reserve Bank’s warnings on the housing crisis have turned from smoke signals to a full-on bonfire. National has ignored them, forcing the Bank into action to save the home ownership dream.

“Now John Key and Bill English are set to ignore yet another warning from the Reserve Bank Governor – this time on the financial stability risks of the halving of global dairy prices and associated drop in the Fonterra pay out, which has opened up a $7 billion black hole in the economy.

“The regions will be most affected. Waikato will see $1.5 billion less in the economy than last year and Otago $350 million less. The regions are already suffering from years of neglect under a National government and can ill afford another blow.

“The fall in dairy prices is putting many dairy farmers into negative equity and already many farmers are borrowing more to fund working capital. The Reserve Bank says that warns that foreclosures and falling land prices are set to increase if the milk price continues to tumble.
“This would be a disaster, not only for those communities that are so reliant on dairy, but for the wider economy. National has to take action and diversify the economy so, as a nation, we are not at the whims of commodity traders.

“National’s economy of milk and houses is looking increasingly shaky which is why the Government has to listen to the words of caution from the Reserve Bank.

“We cannot afford the housing crisis to be followed by a farming crisis,” Andrew Little says.

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