Federated Farmers has joined the call for a halt to the
interest-driving official cash rate (OCR), following the
Reserve Bank's indications it will pause any further hikes.
The OCR rose to 3.5%, as widely expected, last week, amid
increasing calls from unions and social agencies to put a
halt to further rises.
The hike comes at a time of downward pressure on most global
commodity prices, the possibility of Fonterra downgrading its
milk payout, inflation at lower-than-expected levels and the
perseverance of a strong kiwi dollar.
Federated Farmers president Dr William Rolleston said with
the rural economy's sentiment ''decidedly bearish'', a hold
on the OCR was ''perhaps the best we could hope for'', noting
also the decline in value of exported goods for June.
The dairy sector accounts for a large swathe of the rural
sector's $53 billion in lending, with higher interest rates
making debt repayment, or farm maintenance, difficult to meet
for the most indebted.
''Dairy farmers are anxious about their likely payout
following falls in international dairy prices and a
stubbornly high exchange rate,'' Dr Rolleston said.
The dairy payout issue was not helped by the seasonally
adjusted value of exported goods falling 7.4% in the June
quarter. Most of the major primary exports, including dairy,
meat, and logs were all down, Dr Rolleston said.
''Given the drop in farmer confidence and other economic
developments, we actually thought there was a good case for
the OCR to be left unchanged,'' he said.
He hoped the Reserve Bank would be able to keep the OCR on
hold for an extended period, and for that to be achieved,
other government policies had ''to help rather than hinder''.
''This means fiscal responsibility, tight control of spending
and wider policies around regulation.''
Exporters, whether ICT, tourism or the primary industries,
needed policies to assist rather than impede productivity and
competitiveness, Dr Rolleston said.