25 Jul 2014

Farmer relief at interest rate signal

9:40 am on 25 July 2014

Federated Farmers says the strong signal that the Reserve Bank has issued about keeping interest rates on hold will come as a relief to the dairy industry and other primary exporters.

Farming representatives have been voicing concern about rising interest rates and the high New Zealand dollar because of the damage that the exchange rate is doing to export returns.

On Thursday, the Reserve Bankraised the Official Cash Rate, which underpins interest rates, to 3.5 percent in the fourth rise this year.

Dr William Rolleston

Dr William Rolleston Photo: Supplied

Governor Graeme Wheeler signalled further increases were on hold for now and repeated his warning that the high currency was unjustified.

Federated Farmers president William Rolleston said the message he delivered about the unsustainable exchange rate was the right one.

"We weren't keen to see the Governor put the interest rates up, but having done so and having given such a strong statement about the over-valuation of the dollar and that interest rates would be on hold for some time, I think he's actually done the right thing."

"The signal that he's given that there won't be further increases in the interest rates means the market's not going to have that uncertainty, which will put pressure on the dollar and we've seen the dollar come off almost a cent already," he said.