Strong dollar keeps shoppers spending, but bad for farmers

By ANNE GIBSON


The strength of our currency means that Christmas shoppers buying imported goods are paying less at checkouts today, but farmers are being hammered hard.

Latest farm price figures show a depressing trend of falling figures throughout the key dairying sector.

The national median farm price fell from $745,000 in November last year to $725,000 last month.

Dairy farmers are feeling it particularly with their median falling from $1,556,250 a year ago to $1,481,000 last month.

BNZ's head of market economics, Stephen Toplis, attributed the price drops "almost entirely" to the strength of the kiwi dollar, which is depressing returns.

"Farm earnings are going down almost exclusively because of the currency appreciation and they have been declining for the past 18 months to two years," Toplis said.

But like any other consumer, farmers would benefit from the other side of the ledger, paying less for imported goods.

"The price of tractors, other equipment and in some cases fertiliser will be cheaper," Toplis said. Manufacturers were also enjoying the strength of the dollar.

The appreciating currency meant Christmas shoppers interested in big-ticket items like cars or appliances would find the buying much better this year, he said.

"People spending $1500 or more will usually be able to negotiate a good deal," he said.

GDP figures released last week also reflected high consumer spending and showed that the economy was humming along thanks to the urban property boom and consumer spending.

Government statistician Brian Pink singled out the marked lift in household expenditure on consumer durables (up 4.5 per cent) and new housing construction (up 4.0 per cent) for particular emphasis.

Real Estate Institute rural spokesman Murray Cleland predicted farm prices would continue to drop next year.

"Although rural property sales are still strong, the year-on-year median price is starting to slow and will continue to do so over the next few months, as returns are affected by the strength of the dollar," he said.

But the number of farm sales has risen in the latest period, from 213 in November last year to 272 last month.

Sales volumes were up in many sectors, including dairy properties, finishing, forestry, grazing, horticultural and South Island high country farms.

Toplis said New Zealanders should not lose sight of the rural sector's impact and its importance to the national economy.

"People still under-estimate the leverage the rural economy has over the rest of us," he said and although it was too early to say if the price drop was just a "rough patch" or the emergence of a trend, Toplis said people should not ignore the impact of falling farm prices.