Farmers are citing low confidence as a reason for the Reserve Bank not to raise the official cash rate on Thursday.
Many expect the Reserve Bank to raise the official cash rate 25 basis points to 3% on Thursday, but Federated Farmers yesterday released a survey indicating weak confidence in the sector.
The survey for the six months to July showed just 2.9% of farmers expected the economy to improve, a decline on January's survey when 4.4% expected an improvement, but a lift on the same survey a year earlier.
The federation's economics spokesman, Philip York, said farmers were more optimistic about the profitability of their businesses compared to recession-year levels, but have major concerns with the impact of policies such as the emissions trading scheme (ETS).
Dairy farmers were the most optimistic, with 28.5% expecting economic conditions to improve.
A total of 52% expected profits would be greater and were planning to increase production and expenditure.
Mr York said the survey showed 64% of dairy farmers and 27% of sheep and beef farmers expected to increase production, but much of that was due to the end of the drought.
The increased expenditure was due to farmers factoring higher costs associated with the ETS.
Sheep and beef and cropping farmers were the least optimistic, with only 1.7% expecting economic conditions to improve, and 11.7% expecting conditions to worsen.
Nearly a third of farmers raised the ETS as their main concern, followed by the volatility and level of commodity prices, rising farm input costs, interest rates and debt, compliance costs and regulation.
There had been a major turnaround in priorities from the January survey when commodity prices and the effect of the exchange rate topped the list.
Mr York said debt reduction was now a priority.
Figures from Massey University showed that in the past 10 years, total rural indebtedness had risen from $12 billion to $45 billion.
Dairying carried an estimated $30 billion of that debt.
Barometers such as the ease of finding skilled staff compared to earlier in the year, especially in dairying, indicated a loosening of economic conditions.
