Farm Finance: Higher Interest rates Won’t Help Farming Cause
June 16th, 2010
Federated Farmers didn’t have any real chance of success when it pleaded with Reserve Bank Governor Alan Bollard on the eve of his policy review to hold off on raising interest rates a little longer. In raising the OCR, Bollard noted the nation’s strong export receipts and high prices for commodities. High dairy prices have delivered the best gain in the terms of trade since the mid-1970s and the relatively low kiwi dollar is ensuring more of the export receipts come home.
Not all farmers are cheering just yet. Looming are the carbon costs to be imposed by the Emissions Trading Scheme on transport and energy, which farmers will feel. The NAIT track and trace system for livestock is an additional cost. The Fed’s economics spokesman Philip York says Govt spending announced in last month’s Budget is also inflationary. He says “there’s a heap of potential for inflation out there” and it’s mainly coming from non-tradables and local councils.
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At the Feds board meeting last week, some of the presentations were “cracked record stuff” – complaints about Govts spending beyond their means. York says he doesn’t like being a glass half-empty person, but not all of the rural sector is seeing the good times. “It’s not feeding through particularly for the meat and wool sector. Prices are still pretty average.”
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