Economic weather report: Fonterra payout in danger as auction price slides

Bernard Hickey delivers an economic weather report in association with ASB on what Fonterra's poor auction result for June means for the payout, the economy and interest rates. The 12% fall in the wholesale auction price to February lows, along with the rise in the currency to 65 USc, will make it difficult for Fonterra to stick to its NZ$4.55/kg payout, which may mean a longer recession and increase the pressure for the Reserve Bank to cut the Official Cash Rate by 25 basis points to 2.25% next Thursday.