Treasury secretary Gabriel Makhlouf said the latest fall in the GlobalDairyTrade auction marked the fifth in a row since the the Government’s accountants had prepared the forecasts for the May 21 Budget.
Appearing before the finance and expenditure select committee in Parliament on Wednesday, Makhlouf said the drop suggested Treasury’s forecast for a recovery in the coming months could be optimistic.
«While we anticipated continued weakness in dairy prices in our forecasts, there is now a greater risk that prices could take longer to pick up, with the recovery starting later this year or in early 2016, rather than in the second half of the year as anticipated.»
Asked how many dairy farmers were currently losing money, Makhlouf said he did not have a view, but that he had seen optimism from farmers that their operations could pull through.
«One of the things that struck me when I went to Fieldays last week was the extent to which many people I spoke to could see themselves working through the cycle,» he said.
«They realise they’re under pressure in the diary sector but actually they themselves, as farmers, could see themselves working through the cycles and the banks appear to have a similar view, so were extending credit lines.»
Makhlouf said that the fall in dairy prices had been somewhat offset by a drop in the New Zealand dollar, which had declined to five year lows against the US dollar on expectations that the US Federal Reserve could raise interests as the Reserve Bank of New Zealand dropped the official cash rate.
The fall meant inflation was likely to be slightly higher than Treasury expected in the Budget at 0.4 per cent in the year to June 30. This was «lower than we would normally expect at a time when the economy is growing as strongly as it is now».
Source: Stuff
