Lower dairy pay-out will peel off millions

BAD: The Reserve Bank has warned about an over-reliance on the dairy sector being a threat to the wider economy. PHOTO/FILE

The value of Hawke's Bay's small dairy industry to the regional economy has been shaved by more than $65 million in the last year because of the decline in the milk payout, according to figures released by Opposition leader Andrew Little.

The figures come amid future concerns raised by the Reserve Bank with the dairy payout having retreated from the high of $8.50 a kilogram of milk solids last year to the most recent $4.50, the lowest since 2008.

Hawke's Bay is, however, a low-key player in the national scheme of dairying things, with just 1 per cent of the industry, according to the latest available figures, the New Zealand Dairy Statistics for 2013-2014.

The region had 1 per cent of the dairy cows, 1 per cent of the herds, 1 per cent of the dairy land, and provided 0.6 per cent of the jobs in Hawke's Bay. Waikato had 23.7 per cent of the cows, and will suffer a loss of $1.5 billion.

The Reserve Bank warned an over-reliance on the dairy sector is a threat to the wider economy, as well as farmers' futures, and Mr Little is worried Prime Minister John Key and his Government will ignore the signals.

He compared it with the home-buying crisis and said: "The Reserve Bank's warnings on the housing crisis have turned from smoke signals to a full-on bonfire. National has ignored them, forcing the bank into action to save the home-ownership dream.

"The fall in dairy prices is putting many dairy farmers into negative equity and already many farmers are borrowing more to fund working capital.

"The Reserve Bank says foreclosures and falling land prices are set to increase if the milk price continues to tumble."

Mr Little said the regions, such as Hawke's Bay, stood to lose. "It's that $65 million that will be lost from the Hawke's Bay economy.

"This is a bystander government," he said, emphasising the need for diversity in the regions and the economy. "They do very little, and say this will sort itself out."