NZ PM Key tells more lies

New Zealand has a prime minister who lies routinely for a living.

The all in dairy prices is part of a collapse in demand that is part of the tanking of the world economy (witnessed by a collapse in commodity prices across the board and of the Baltic shipping index).

The rising NZ dollar is playing its role in destroying the New Zealand commodity trade-based economy.

Winston Peters is speaking the truth on this. Key is lying, as usual.

NZ dollar rise reflects economy strength - PM 

The dollar's near parity against the Australian currency reflects in large part the strength of the New Zealand economy, says Prime Minister John Key.

John Key speaking to media before last year's Budget -Photo: RNZ / Diego Opatowski



Radio NZ,
7 April, 2015



This morning the dollar was trading around 99.3 Australian cents, after reaching a high of 99.78 yesterday - just shy of equal rating for the first time since it was floated 30 years ago.

Listen to John Key on Morning Report ( 5 min 21 esc )

Mr Key said the strength against the Australian dollar also reflected the perception among those who price currencies of which economy is in better shape.

"It is weakness in Australia as well ... but I think over the last six or seven years we've seen a growing confidence in New Zealand businesses." he told Morning Report.

"They've used the historically high exchange rate, particularly against the US to buy a lot of capital equipment and to upgrade their businesses and build new markets."

Mr Key acknowledged many exporters were not happy with the situation but encouraged them to continue to invest and drive productivity. New Zealand firms were doing well on the international stage, he said.

'Long term view'

Manufacturers and Exporters Association president Tom Thomson said exporters would struggle because of the fall in the Australian dollar's value.

"You don't dodge in and out of markets easily, you try to hang in there for the good times and the bad, but I don't think that's going to be sustainable," he said.
Philip Gregan, chief executive of New Zealand Winegrowers, said although wine exporters were unhappy with falling returns, they were trying to take a long term view.

"Some producers may be thinking about diverting supplies to other export markets such as the US or the UK, but most of the winemakers are committed to the Australian market, so they don't want to do that."

According to the New Zealand Trade and Enterprise website, Australia is New Zealand's second largest bilateral trading partner, with two-way trade worth $23.9 billion.

New Zealand's exports to Australia are primarily crude oil, gold, wine, cheese, freshly-prepared food and silver.

Labour party leader Andrew Little said the exchange rate was because of the weakness of the Australian economy which is suffering from falling iron ore prices.
The reality was New Zealand's economy faced major headwinds, he said, of falling dairy prices, a lower dollar against other major currencies and an out-of-control housing market.

Listen to BusinessNZ CEO Phil O'Reilly discuss the dollar on Morning Report ( 2 min 22 esc )

Mark Lister, head of private wealth research at Craigs Investment Partners, said although some people saw an Official Cash Rate cut as a solution to the strong Kiwi, the Reserve Bank was in a tough spot.

"I don't think the Reserve Bank really wants to be forced to reduce interest rates to target the currency, because all that will do is add fuel to the fire with Auckland housing," he said.

"They sort of want to keep us on a steady path. I don't envy them at all. They are in a difficult position."

Mr Lister said the recent spike this weekend was mostly due to the Reserve Bank of Australia expected to further cut interest rates later today.

"The Reserve Bank of Australia cut interest rates in February, so they are now sitting at 2.25 percent, remember New Zealand's OCR is 3.5 percent, so there is already a gap there and that gap is likely to widen," he said.

Commodity demand slowdown

Mr Lister said China has had an impact on the situation, with a slowdown in demand for commodities such as iron ore putting pressure on the Australian economy, while New Zealand has been doing well.

The price of iron ore dropped to a new record low of $US46.70 at the weekend, compared to $US120 per tonne this time last year.

The strong dollar is good news for holidaymakers wanting to travel across the Tasman, and Brent Thomas of House of Travel expects 70,000 to 90,000 more New Zealanders to visit Australia over the next 12 months.

Winston Peters: Forestry and dairy at risk

Forestry companies have failed and many farmers are teetering on the brink of bankruptcy because of the high dollar, New Zealand First leader Winston Peters says.

Govt: World 'awash with milk'

The Government is blaming a slump in milk prices on the world market being awash with milk.

Chinese Dump Milk as Prices Fall

Farmers in other countries scale back herds, brace for lower incomes

Milk production gains come at a cost

Ramping up milk production is pushing dairy farmers deeper into debt and making them vulnerable to international price fluctuations, an agricultural consultant says.

Photo: AFP



An economist with Ropere Consulting, Peter Fraser, said the  10.8 percent average drop in the GlobalDairyTrade auction overnight on Wednesday] - the largest fall in more than four years - had shown up a bigger problem.

He said more milk was being produced, but the cost of producing it had ballooned.

"We've confused production gains with productivity gains and we've not had the productivity gains we've thought we've had, we've let our cost structures get out of control.

"And that's actually made farms much more vulnerable to fluctuations in international dairy prices."

Mr Fraser said dairy debt had gone from about $10 billion in 2000 to well over $30 billion - an increase of 300 percent, while production had only increased by between 50 and 60 percent.

He said it was time to challenge "the sacred cow" of increasing dairy production ad infinitum.

Further dairy intensification would involve putting more cows into barns and feedlots, as was done in the United States and Australia where it was economically viable because of their large arable industries.

Mr Fraser said this was neither environmentally nor economically sustainable in New Zealand.

Continuing to increase production only made sense if prices continued to climb, and this was no longer the case, especially with other producers coming into the market.

The dairy chairman for Federated Farmers, Andrew Hoggard, said the New Zealand Dairy Industry's strategy was not just about production but productivity.

However, he conceded that intensifying production had come at a price.

"It's a really difficult thing to change, you can't just scale back as easily - you can get locked into a system of farming.

Mr Hoggard said it did not make sense to change farm management styles every season, and individual farmers had to find the systems that suited them best.