17 Jun 2014

Dairy incomes expected to take a hit

9:01 am on 17 June 2014

The Reserve Bank is predicting dairy farmers' incomes will take a hit this season with global dairy prices falling.

Reserve Bank Governor Graeme Wheeler raised the Official Cash Rate to 3.25 per cent last week and said the economy had considerable momentum.

But he said that while export prices remained high for most commodities, dairy and forestry prices were falling.

Dairy prices have fallen by 26 percent since February on the Global Dairy Auction, and Mr Wheeler predicts they could fall by a further 12 percent.

That would affect not just farmers but the whole economy, he said.

"And if you look at the effect on dairy farmer incomes, we think it's roughly around $2.25 billion over the next year, and if you take GDP here, it's roughly $220 billion, so that's a 1 percent decline in real incomes, if you like, so they are significant."