sign up log in
Want to go ad-free? Find out how, here.

PM says 15% dairy price fall this year linked to lower oil prices, which helps consumers; says RBNZ will be monitoring dairy prices; says no need to exclude foreign land buying from TPP as NZ can still impose big taxes on buyers, but no plans to for now

PM says 15% dairy price fall this year linked to lower oil prices, which helps consumers; says RBNZ will be monitoring dairy prices; says no need to exclude foreign land buying from TPP as NZ can still impose big taxes on buyers, but no plans to for now

By Bernard Hickey

Prime Minister John Key has downplayed the wider economic impact of the 15% fall in whole milk powder prices since the beginning of 2016, saying it was linked to lower oil prices that would benefit consumers and banks had so far been responsible in supporting farmers.

Whole milk powder prices fell 10.4% at last night's Globaldairytrade auction, extending their fall since the first auction of 2016 to 15.3%. Fonterra cut its payout by 45c/kg to NZ$4.15/kg last week and economists are looking at revising their forecasts for 2016/17 down closer to NZ$5/kg. This would imply a third consecutive year of payouts substantially below the NZ$5.40/kg seen as the average break-even level.

"What is clear is that global commodity prices are falling," Key told reporters this morning when asked whether he was more worried about the economic outlook.

"The fall in dairy prices overnight is somewhat related to the fall in oil prices. From New Zealand's point of view, actually that fall in oil prices is quite a good thing for consumers because they'll be paying less at the pump," he said.

"But the practicality is that a lot of countries that buy our dairy products are reliant on oil income and that's what's having an impact."

Key said the Government was doing everything it could to help dairy farmers "and we hope the banks continue to work alongside them."

"They've been pretty responsible so far. It certainly looks like a challenging year for dairy farmers," he said.

Key said he had not had personally had discussions with banks about their continued support for farmers.

"To this point they've largely been working constructively with dairy farmers, but they're working with them and they've got their own balance sheets," he said.

Reserve Bank help?

Asked if the Reserve Bank should do more to help farmer, he said: "The Reserve Bank Governor is conscious of it, but there's a limit practically what he can do. Let's see how things play out."

Economists from ASB, Westpac, HSBC and First NZ have called on the Reserve Bank to cut the Official Cash Rate by a further 50 basis points to 2.0% this year to offset the impact of a slowing global economy and lift inflation back into its target band. Key was speaking before Governor Graeme Wheeler's speech and jobs figures showing 1.3% jobs growth in 2015 and an unemployment rate of 5.3% in the December quarter.

TPP debate

Elsewhere, Key said he would now attend Waitangi Day celebrations after receiving a formal invitation from the trustees governing the ceremony. He had said yesterday would not attend if he was not invited, given a local iwi voted to block him. As many as 6,000 anti-TPP protestors are expected at the weekend event in Northland, while a TPP signing ceremony in Auckland tomorrow is expected to face heated protest.

Asked why the Government had not tried to negotiate a TPP exemption for foreign land sales, as achieved by Australia and demanded by Labour, he said:

"We don't need to do that. Exemptions on foreign land sales don't work. Australia has proven that ineffective. There are plenty of other mechanisms by which you can control the amount of foreign ownership of land, including very significant property taxes, and there's nothing in TPP that prevents that."

Asked if the Government would need to use such taxes, he said: "I don't think so, but we've always got that option."

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

29 Comments

He down plays everything.
"Dont worry, be happy, everything is going to be all right ..........."
They have no vision, don't seem to know where they are going and don't seem to care either.

Up
0

He has taken the "she'll be right" adage to a level I've never heard before. I'm fearful of what the next pearls of wisdom will contain. Almost Pythonesque.

Up
0

With "yes men" this is the modus operandi. Works well (until it goes dably worng, but then they have a fall guy), no one wants to listen to realists/"doomers" as what they say is negative and ppl just cannot handle it. La la land...

Up
0

I saw The Big Short yesterday - there was a quote " The truth is like poetry. And everyone f**king hates poetry". The denial by JK reminds me of GW Bush ( the 2nd ) and his denial about the problems facing the US by encouraging people to go "shopping more". Debt is good ...... and soon the bill will be due.....

http://www.washingtonpost.com/wp-dyn/content/article/2008/10/03/AR20081…

Up
0

Bernard Hickey

First paragraph

Do you believe that - did you believe HIM

Up
0

I would like to seen some research that supports the comment that dairy prices are linked to lower oil prices. Some real research not just someone saying they are related. Say it often enough and a lie becomes believed as the truth.

Up
0

It's cheap money that did the damage. But hey over there...
http://finviz.com/futures_charts.ashx?t=QA&p=m1

Up
0

China re-allocating it's market to EU suppliers has little to do with the price of OIL

Up
0

The futures market is absolutely tanking;
http://www.nzxfutures.com/dairy/quotes/wmp

Not that a $3.XX payout this year and next is an issue right JK? A stern word with the banks via the media should sort it out?

Up
0

can you explain that chart for me please?

Up
0

The 'last' column is the price being paid today in USD/tonne for WMP each of the months down the chart. The 'change' column shows how the market has moved today.

Up
0

"15% fall in whole milk powder prices since the beginning of 2016, saying it was linked to lower oil prices" ....OK so if it is and if as is likely there is more oil (or at least as much as today) for a few years with inadequate demand then that signals a low milk price for a few years as well.

"Key said the Government was doing everything it could to help dairy farmers " I smell moral hazard, just wait for the Govn to start picking up the tab for the orgy of dairy debt .

Up
0

JK is looking more and more like the proverbial ostriches behind as he sticks his head deeper into the sand. Being all BS and denial less than two years out from an election should see Nation relegated perhaps to the third party benches because of the mess they will have chaperoned.

His denial is based on the fact that to do anything substantial that will have a positive effect on the economy will mean going against the principles that he has clung to so far, and that he has no ideas about what to really do. Problem is Labour isn't any better, and Winnie or the others? ... oh dear....

Up
0

Agree.

Even for the Green's who have more of an idea of the longer term problems, no one want to know. So trying to speak up is a potential vote loser.

WP is too busy pandering to grey power to buy votes to pass the Greens to become King maker one last time. Personally I think the Greens vote will stagnate in the next general election as they just dont see how their socialist views turn the centre / swing voter off, so WP could well pass them next year I believe.

Up
0

So just what should the Govt do; what can it do that would work out??
Nationalise the dairy industry??
Subsidise milk?
Bail out the dairy industry??
Resign en masse??
Ask Winston??(try getting a straight answer out of that one!!)
Easy for "us" to blame the Govt for doing nothing, but sometimes that is the least harmful option.

Up
0

Kiwichas. For a start, they can stop deluding themselves and those who don't question anything that dairy prices will be ticking upwards round about now. How's that working out? To those dairy farmers who believe everything that comes out of JK's mouth, I hope they didn't make any financial decisions based on his no doubt detailed analysis of the situation! If they're going to do nothing at which this government is expert, they can do everyone a favour and keep their mouths shut as well instead of giving some in desperate situations out there false hope. What would you rather have? A false prophet or a grounded realist?

Up
0

John Key just makes stuff up. And his calm patter seems to help it hard to argue with. So far anyway.
There has been a remarkable acceptance of the government unusually far into the third term. But looking at the comments above, seems to me the tide is finally turning.

Up
0

It doesn't help that the MSM never call him out during the interviews.

Key is a master at avoiding the tough questions and well-trained in 'goobledegook'. The way in which he talks in circles about a topic but never address the question is second to none.

Up
0

Yeah. Did any of the microphones there ask him to explain what he means when he says Dairy Prices and Oil are linked? Do they have any idea what he's talking about or do they blindly record and report and question nothing?
To all you dairy farmers out there who voted for Donkey, it's about time you realised that your vote doesn't count any more and he ain't gonna do a thing to help you. All the decisions are being made for and in Auckland now.

Up
0

Got a feeling that the coach is Crosby -Textor. Their company c.v. is ......:)

Up
0

Got a feeling that the coach is Crosby -Textor. Their company c.v. is ......:)

Up
0

Talking of picking up the T.A.B.. for others debts..

(Does that stand for the Totalisor Agency Board, or what?).

http://www.marketwatch.com/story/white-house-says-republicans-co-own-le…

So if all debt is money, we are quids in...as soon as we can catch up to the almighty USA Dollar.

Up
0

Yeah. Don't concern your pretty little heads with reality.
Just get this. Every overseas investor and potential fly-by-night applicant for residency brings in a few dollars (yuan and rupees mainly) to linger here for a while and make us all think our currency can stand the rout.

Up
0

Sounds almost plausible doesn't it. Until you think about it.

Up
0

Why don't we index Ministerial salaries to per capita weighted macro economic performance?
It is standard practice with senior management in the private sector to offer incentive; why not extend it here.

It might actually disincentivise JK and the cronies from oblivious indifference on topics such as this.

Up
0

He doesn't care about his salary. He gives half of it away doesn't he. He is playing a much bigger game than that.

Up
0

Or, all MP's cash up before entering government and any return is linked to how well the economy performs during their term. Maybe then the various parties could actually learn to cooperate instead of bickering and blaming each other like little children.

Of course, if we the people weren't so ignorant about everything we wouldn't be blaming the government and we'd actually make a difference ourselves.

Up
0

TPPA, stands for Too Poor to Purchase own Assets. Half price dairy farms for foreigner buyers. Government will provide local farmers with a rope to hang themselves.

Up
0

TPPA - The Perpetual Prerogative of America - an exercise in ritual obeisance to our masters. Still, could be worse.

Up
0