Farmers seek halt on OCR

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.


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