Fonterra capital return could boost GDP – ANZ Report
The Fonterra divestment capital return should provide “a tailwind to GDP growth” next year, according to a new ANZ NZ report, but it’s not “manna from heaven” for the economy.
The bank says while under lockdown rural New Zealand feels like a relatively safe place to be with farm daily life is continuing in a much more normal manner than in the cities.
However, it warns that the country cannot avoid the fallout from the crisis.
In a report, just released on the agri-sector, ANZ says having daily tasks to attend to is a good antidote to worrying about something you can do little about. But economic growth rates in New Zealand and globally have been slashed as we all hunker down to avoid the spread of COVID-19.
The bank says recent rains have also helped relieve tensions for the agricultural sector, although a few more dry weeks would be welcomed by those busy harvesting apples and grapes. Although the drought has now broken in most parts of the country, it will be some time before there is sufficient feed on hand to eliminate the need for supplementary feed.
The report says NZ is fortunate to produce enough food to feed ourselves’ eight times over – therefore the country’s supermarket shelves won’t ever be bare. And despite the forestry sector shutting down for now, we aren’t going to run out of toilet paper any time soon either.
But the bank warns we can’t avoid the economic fallout of this horrid virus.
“Our own GDP forecasts have been slashed, with a sharp contraction forecast for Q2 and negative economic growth assumed for the next 12 months. Unemployment rates are also expected to lift to levels not seen since the early 1990s. Global economic conditions are also expected to be dire; as a trading nation we can’t escape the fallout”
In terms of the various sectors, ANZ says dairy prices have soften globally but it is holding fast on the milk price for this season at $7.15kgs/MS. However, it has revised this down to $6.45kgs/MS for next season. The bank says the drought has impacted on the sheep and beef sector, with beef prices softening but lamb prices holding.
It believes the forestry sector may benefit from the lockdown as this will allow logs in the market to move through the system and reduce world stocks.
The tourism sector has come to a sudden stop and our borders will have to remain closed until this global pandemic is under control. This will also impact our rural communities who have integrated tourism into their farming operations by providing rural accommodation and experiences.
And despite the forestry sector shutting down for now we aren’t going to run out of toilet paper any time soon either.
