Fonterra's increased payout for 2013-14 would lend a sizeable boost to the economy, Westpac said in a commentary.
The cooperative dairy giant this morning raised its forecast milk price to farmers by 50 cents for the 2013/14 year to $7.50 per kg of milk solids, reflecting constrained global supply and the lower New Zealand dollar. The milk price forecast is a $1.70 improvement last season's price of $5.80 per kg. Fonterra forecast a 2013/14 dividend of 32c, unchanged from the previous year.
Westpac said 2013/14 was shaping up to be a bumper dairy season.
"The lift in the milk price, combined with an expected rebound in production, represents a sizeable boost to New Zealand's national income," Westpac said in a commentary.
"The $1.70 lift in the milk price and a 5 per cent lift in production would boost the economy by around $3.4 billion or around 1.6 per cent of nominal GDP compared to the 2012/13 season," the bank said.