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Interest Rates Hurting Farmers

8 December 2005

Interest Rates Hurting Farmers

Higher interest rates, an over-priced kiwi dollar, and lower commodity prices are squeezing farmers' export returns, said Charlie Pedersen, President of Federated Farmers of New Zealand (Inc).

"Agricultural products are still the largest contributors to exports, and the sector is a primary driver of economic growth. Lower farm gate prices for our key commodities cause farmers to close their wallets, which severely impacts on provincial economies and eventually on cities, said Mr Pedersen.

According to the November ANZ Commodity Price Index, commodity prices were down from October for wool (down 5.4%), skins (down 12.2%), dairy (down 1.0%), lamb (down 0.9%) and beef (down 2.1%).

"The Reserve Bank understands the plight of exporters and that business confidence is falling. But its job is being made much harder by government policies that are prolonging the consumer spending spree and therefore pushing up interest rates.

"The government needs to cut back on the rapid growth of its spending, which has jumped a staggering 50 percent in six years. It must also do more to improve the business environment through reducing the tax burden, maintaining a flexible labour market, improving infrastructure, reforming the RMA, and attacking compliance costs," said Mr Pedersen.

ENDS

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