Finance Minister Bill English has ruled out a bailout for struggling dairy farmers after Labour leader Andrew Little said the Government should consider emergency relief similar to that available for droughts.
Little has also called on the Government to "stiff arm" the banks to ensure farmers are not forced off their land because they cannot keep up mortgage payments after the latest slump in milk prices.
"They need to lean on banks and lean on Fonterra. The conditions have emerged now where there are significant risks not only to farmers and Fonterra but actually to the prospect even more productive land could fall into foreign hands."
Little's comments come after Fonterra dropped its forecast milk payout to $3.90 a kilogram last week - the 'severe' zone under Treasury's forecasts. In an interview with the Herald, Reserve Bank Governor Graeme Wheeler said its worst case scenario was that farm prices could fall by up to 40 per cent and banks have to write off up to 15 per cent of the $40 billion in loans if dairy prices did not lift within three years.
English told TVNZ's Q+A yesterday that he doubted that would be a threat to the financial stability of the country, banks were stronger than at the time of the global financial crisis and the Government would not step in with any bailout for farmers.