August 30, 2007

New Zealand's dairy industry upbeat on good prices

Business confidence for the dairy sector New Zealand is up this month, buoyed by a drop in the currency and a bigger payment to dairy farmers.

About seventeen percent of companies expect their sales to be up for the next 12 months compared with 12 percent in July, according to a survey released by ANZ National Bank Ltd. in Wellington.

The slump of New Zealand dollar by 13 percent from a 22-year high on July 24 boosted exports and making imported products more expensive. Fonterra Cooperative Group Ltd., the world's biggest dairy exporter, raised its milk payment 43 percent, citing record prices, hiking incomes of its 10,900 farmer-suppliers.

According to Cameron Bagrie, chief economist at ANZ National Bank, New Zealand's economy is literally sitting on a "huge cash cow and such an income boost will diffuse the economy in general". He said the country's composite growth indicator is pointing toward growth of 2 percent over the coming year.

New Zealand Central Bank Governor Allan Bollard predicted in June that the country's economy could grow 2.9 percent in 2007 and 3 percent in 2008 compared with 1.5 percent last year.

The agriculture sector was most confident in achieving growth, with 37 percent expecting sales to improve. Confidence is also strong in the manufacturing industries. Retailing and construction businesses doubted growth this year as record-high interest rates crimped consumer spending.