Sharechat Logo

NZ dollar drops to four-year low on concern low Fonterra payout will dent economy

Friday 29th May 2015

Text too small?

The New Zealand dollar dropped to its lowest in more than four years on concern about the outlook for the economy after Fonterra Cooperative Group yesterday announced a low payout to dairy farmers.

The kiwi touched 71.27 US cents, its lowest since March 2011, and was trading at 71.74 cents at 8am in Wellington, from 72.42 cents at 5pm yesterday. The trade weighted index fell to 75.26 from 75.92 yesterday.

Fonterra yesterday cut its forecast payout to farmers for this season by 10 cents to $4.40 per kilogram of milk solids, from a record $8.40/kgMS last season, and said it expects to pay $5.25/kgMS next season as prices for dairy products stay lower for longer than expected. Dairy products are New Zealand's largest commodity export and the weaker payout is expected to dent economic growth this year.

"There is some near term cash flow implications for dairy farmers in that the 2015 payout has been revised down, it means that the income to dairy farmers over the next few months will be a lot lower than it was a year ago and probably a lot lower than many of them had expected, so that's going to put pressure on farm spending and debt," said Peter Cavanaugh, client adviser at Bancorp Treasury Services.

"The reduced income for the biggest sector of the economy means there will be less spending, so it has a negative flow on effect into the domestic economy, in terms of GDP (gross domestic product) and consumption so it weakens the outlook."

Today, building consent data for April will be released at 10:45am and the ANZ business confidence survey is scheduled for publication at 1pm.

The New Zealand dollar slipped to 93.79 Australian cents from 94.16 cents yesterday, dropped to 65.56 euro cents from 66.31 cents, fell to 46.86 British pence from 47.14 pence and declined to 88.96 yen from 89.75 yen.

 

 

 

 

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

SML - Synlait Milk Limited - Trading Halt of Securities
AIA - Auckland Airport announces board chair changes
AIA - Auckland Airport announces board chair changes
CEN - Tauhara commissioning progress update
FPH initiates voluntary limited recall
March 28th Morning Report
KFL Celebrates 20 Years of Excellence in Investment Mgmt.
SVR - Savor FY24 Earnings Guidance & Change in Banking Partner
NZK - NZ King Salmon Investments Limited FY24 Results
March 27th Morning Report