Land of the long white cow: #dairy delivers for New Zealand

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New Zealand is poised to become the first developed markets economy to raise interest rates on Thursday, a turn of events that will make it the envy of central banks everywhere.
 
The Reserve Bank of New Zealand has all but guaranteed a rate hike at its March policy meeting after strong signalling as far back as last year.
 
The case for tightening is compelling thanks to a robust terms of trade. The Kiwi currency is trading close to parity with the Australian dollar fetching 94.4¢ on Wednesday; nearing the eight-year high of 95.3¢ it hit in January. The RBNZ will probably raise rates one-quarter of a percentage point to 2.75 per cent, the first move in around three years.
 
Nomura interest rate strategist Martin Whetton observed how New Zealand was going through the same terms of trade boom that Australian enjoyed for a long time. “They’re benefiting in the same way. We just have come out of ours,” he said. But there are significant differences too.
 
New Zealand is exporting dairy, the ‘iron ore of the Pacific’, which is an arguably more sustainable commodity than iron ore, the ingredient for steel production. “One is going to give you a high beta and a whole lot of money,” said Mr Whetton of Australia’s number one export. “The other will be a bit of a slow burner but it is sustainable.”
 
Another way of saying that is Australia catered to the industrialisation of China but New Zealand is catering to its rising numbers of middle-class consumers. “Being a food exporter when China and India are trying to secure supply lines for the next 100 years it’s a pretty good thing,” said Mr Whetton.
 
New Zealand’s economy has also benefited from the stimulatory effect of rebuilding Christchurch after the 2011 earthquake. The disaster also contributed to rising house prices, which built a case for the implementation of macro-prudential regulations to remove speculative investment from the housing market.
 
First NZ Capital economist Chris Green found that New Zealand house prices increased in February even though sales growth softened, according to a report to clients.
 
The rise in the nation’s house prices is dominated by Auckland, where prices are up 16.9 per cent annually to a record high.
 
JPMorgan economist Tom Kennedy highlighted that consumer behaviour in New Zealand could preclude the RBNZ from aggressive hikes over the course of this year because housing inflation has not been matched by consumer behaviour.
 
“Consumer restraint has been very important in limiting the inflationary effects of housing strength, and is very much contrary to behaviour during prior housing upswings,” he said.
 
Mr Kennedy predicts rate increases of three-quarters of a percentage point to come.
 
Meanwhile, business and consumer conditions in Australia are faring poorly, as shown by Tuesday’s weak business confidence survey and Wednesday’s revelation that consumer confidence has fallen for a third straight month as news of jobs losses dents optimism.
 
Iron ore prices crashed in the past 48 hours, followed by copper.
 
Even so, Australia might not be too far behind New Zealand. The Reserve Bank of Australia has indicated it is planning for a period of stability in interest rates but inflation, underpinned by the weaker Australian dollar, could motivate the RBA to increase interest rates late in 2014, some economists suggest.
 
Source: SMH

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Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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