Further falls overnight in dairy auction prices have highlighted the failure of National’s economic strategy, the Green Party said today.
Dairy prices fell a further 11 percent overnight, reaching their lowest point in six years at US$2054 a tonne. Increasing supply suggests there could be more bad news to come.
“National has failed to build a strong, resilient export sector,” said Green Party Co-leader James Shaw.
“The simplification of our export economy to a few basic commodity exports like milk has left our whole economy vulnerable to the boom and bust of dairy prices.
“It’s not quite a perfect storm, but the risk is that as the dairy boom turns into a bust, it could take the whole economy down with it.
“National’s economic strategy of putting all your eggs in one basket is not a resilient way to secure our long-term economic prosperity.”
The Government’s Budget forecasts have been based on dairy prices recovering from now to reach US$3,900 a tonne by 2016.† It now appears likely that Treasury’s downside scenario, which forecasts further weakness in commodity prices, is coming to bear.
“If Treasury’s downside scenario is coming true, New Zealand can expect a blow-out in the current account deficit and nominal GDP $26 billion lower than forecast out to June 2019,” said Mr Shaw. ††
“Treasury also predicts further trouble for the Government’s books as a result of low dairy prices and low farmer incomes, including higher government debt and a delay in returning to surplus until June 2018.
“A smarter way forward is to invest in innovation and policies that support a broader, high value-added export sector.
“New Zealand invests half what most other developed countries do on research and development and National has failed to turn this number around in any significant way.
“Innovation is a key driver of prosperity in advanced economies, yet National has given lip service to innovation throughout the entire economy while over-investing in low value-added parts of the economy like dairying.
“In the long-run, National’s economic strategy is not helping our farmers nor anyone else that wants to export.”
† Treasury (May 2015), Budget Economic and Fiscal Update, p 13
†† Ibid, pp 59-60