Relief for farmers on floating interest rate
ANZ says the latest cut to its floating rates will be welcome news to many of its business and agri customers still feeling the effects of high inflation and interest rates.
In its latest Financial Stability Report, bank governor Graeme Wheeler lists dairy as one of three systemic risks facing the New Zealand economy. The others are the Auckland housing crisis and the current global financial conditions.
Wheeler says the dairy sector is experiencing a sharp fall in incomes due to lower international prices. Many highly leveraged farms are facing negative cashflows and the risks will become more pronounced if low milk prices persist beyond the current season.
The bank says while the situation in the China market may improve, the recent removal of milk quotas in Europe and the increase in US dairy exports are likely to weigh on prices.
Wheeler says that if the lower dairy payout were to be sustained, “there is a risk that farm values could fall sharply and further exacerbate the increase in financial stress associated with lower farm incomes”.
