New Zealand’s dairy exports are worth around $15.5 billion and account for a third of the country’s export earnings.
Even as prices at recent Global Dairy Trade auctions have started to turn around, ASB Bank rural economist Nathan Penny said the run of lower prices has weighed heavily on New Zealand’s economic outlook.
«In the last few months we have seen a real decline in business and consumer confidence,» Mr Penny said.
«We are expecting economic growth to slow from about three per cent last year to around two per cent this year, and that is likely to continue into the middle of next year.
«But we are seeing dairy prices start to recover, so we do see light at the end of the tunnel.»
Exports of meat and dairy products fell by four per cent in the three months to June this year.
Tourism boost
Mr Penny said a housing boom in Auckland and reconstruction activity in Canterbury, in addition to a strong tourism sector were cushioning the full effect of the dairy price plunge.
The country’s tourism sector, which is its second largest export earner, was also being boosted by a low New Zealand dollar-US dollar exchange rate.
The cash spend by tourists in New Zealand has grown by around 30 per cent in the past year to June.
«We are seeing strong growth in tourism from places like China, Australia and the United States,» Mr Penny said.
«That has been the real star for the economy and the exchange rate is making it cheaper for tourists once they are here.»
Source: ABC