Costs won't be confined to kiwifruit orchards, BNZ economist warns

Kiwifruit vines. Photo / Steven McNicholl

The full cost to the economy of the Psa disease facing the kiwifruit industry could reach beyond the orchard, said BNZ economist Doug Steel.

"The impact will be far more wide-ranging as the upstream and downstream industries cop the fallout from any loss of production and income," Steel said in a research note. "These multiplier effects could easily double or triple whatever impact there is on orchard."

Biosecurity Minister David Carter said this week the Government would provide $25 million to fund an urgent strategy, subject to a dollar-for-dollar match from the industry.

Even with compensation, grower losses over the next two or three years were expected to be about $25 million. The Psa outbreak highlighted the inherent risks associated with primary production and BNZ saw more risk ahead, Steel said.

"As we have been highlighting for some weeks now, we see the current extreme La Nina weather pattern putting a downside risk on summer/autumn domestic pastoral production," he said.

The risks might have implications for domestic monetary policy.

He said that as well as renewed weakness in domestic property markets and concern around sovereign debt issues in Europe, there was a growing chance that the Reserve Bank delayed the restart of its tightening cycle beyond March next year.