4 Dec 2014

Opposition attacks Govt over dairy prices

7:42 am on 4 December 2014

The Government's political opponents are using the latest fall in dairy prices as an opportunity to have another crack at its economic policies.

The key dairy commodity, whole milk powder, fell by a further 7.1 percent in the global dairy trade auction yesterday on top of a 5 percent drop a fortnight ago,

Nathan Guy

Nathan Guy Photo: RNZ

New Zealand's biggest dairy company and exporter Fonterra is expected to reduce its forecast milk payout to farmers when it reviews it next week.

The Labour Party and the Greens accuse the Government of putting all of its trade eggs in one basket by relying too heavily on the dairy sector to drive the economy.

Labour's Economic Development spokesperson David Clark said dairy prices have almost halved since the beginning of this year and that is serious for the economy.

"New Zealand is overly dependent on the dairy sector because Stephen Joyce has failed to diversify the economy. Commodity prices are cyclical and that means there will be good times and bad times.

"When you're managing the economy as the Government is charged to do, it is your responsibility to make sure that in those bad times, there are sufficient other industries that can make sure we have the income as a country to make it prosperous and safe in terms of investment from offshore."

But Primary Industries Minister Nathan Guy disputes the eggs in one basket claim.

"Ah no, not in my view, because if you look at what's happening in the red meat sector, the prices are extremely strong right now and that's because of droughts in the US, so we're seeing big advantages - particularly in beef - which is fantastic.

100914. Photo Diego Opatowski / RNZ. Winston Peters talking about police numbers at Hutt Gables Retirement Village.

Winston Peters Photo: RNZ / Diego Opatowski

"Kiwifruit, now they're telling me that their land values are higher than what they were pre-Psa, so they're coming through that, so I think you need to be aware of the other side of the primary sector as well, which is rebounding really well."

However, New Zealand First said the Government needed to do more to relieve pressure on the dairy industry by tackling the exchange rate to stop the high New Zealand dollar from undermining export returns.

Leader Winston Peters said bad news for dairy farmers ought to see the dollar fall, but the Government's monetary policy was not working.

Mr Peters said New Zealand's dairy farmers have to come first and that starts by amending the Reserve Bank Act so that farmers and exporters are given priority over Grey Lynn's latte set.

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