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Milk price halves: A $7b economic black hole

Global milk prices have halved since the peak last year, creating an economic black hole of almost $7 billion that will suck in regions reliant on dairy, crucial industries and the Government’s books, says Labour’s Finance Spokesperson Grant Robertson.

“The economic black hole from the fall in milk prices is getting bigger and bigger. Since the February 2014 peak, prices have fallen 51 per cent. That will see a large fall in the Fonterra milk payout to farmers.

“AgriHQ has just revised its payout forecast down from $4.70 to $4.51. That makes the black hole almost $7 billion since last season.

“If the price keeps falling or even stays where it is, Fonterra’s payout will be significantly lower than forecast and the economic black hole even bigger.

“The Government’s overreliance on the dairy industry to grow the economy has backfired. National is looking increasingly out of touch and out of ideas on the economy, especially after the Reserve Bank’s astonishing intervention yesterday in calling for more action on the housing market.

“The lion’s share of the milk price pain will be felt in regions that National is neglecting. Many small communities are now almost solely reliant on dairy farming.

“The fall in dairy prices shows National’s failure to diversify is hurting the economy, both locally and nationally.

“The Government has failed farmers and the wider economy by not encouraging other sectors to grow and contribute to economic growth. Despite promising to rebalance the economy they haven’t even got out of the starting blocks.

“New Zealand needs a modern, diverse economy that creates well-paying jobs across all industries. These are the perils of a one-dimensional economy,” Grant Robertson says.