Fonterra payout drop shows holes in Govt strategy

The decision overnight by Fonterra to further reduce its forecast milk price must jolt the National Government to admit its economic direction is not working and commit instead to a major investment in research and development (R&D), the Green Party said today.

Fonterra has decided to cut its forecast Farmgate Milk Price for the 2015/16 season from $4.15 per kilogram of milk solids to just $3.90, following lower-than-expected demand from China and Russia, and higher than forecast dairy production in the European Union (EU).

“The National Government needs to recognise that its ‘one product to one market’ economic strategy has put the economy at risk, and will continue to do so if we don’t diversify our export base,” said Green Party Co-leader James Shaw.

“Recent significant policy changes to EU production quotas and US domestic subsidies mean that dairy prices may never be the same again.

“According to the OECD, New Zealand invests roughly half of what most other developed countries do in research and development, and significantly less than other, small advanced economies.

“Falling dairy prices must be a signal to massively ramp-up government investment in R&D to diversify our economy away from its dependence on one export commodity.

“Farmers can’t just grin and bear it, waiting for the global trends to change back in New Zealand’s favour.

“The government can’t control the prices of exports, but it can control the economic direction of the country through creating incentives to innovate and diversify. Businesses, including farmers, will do the rest,” said Mr Shaw.

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