Sporadic 16 - July 30 2015

Sporadic 16 - July 30 2015

The sharp fall in dairy prices happening at the same time as falls in business and consumer confidence readings has led some people to predict recession and further large falls in interest rates and the exchange rate. However ahead of our last two recessions in New Zealand both interest rates and the exchange rate rose sharply to high levels. This time both are falling.

In additionall, when the dairy payout fell by 32% in 2003 the economy kept growing over 4%. The over 50% payout decline from the peak two season's ago is bigger this time around, but it is associated with recent farm debt growth of 6% and not the 25% peak back then. Thus while dairying regions are going to feel pain this coming year, there are many mitigating factors and recession for NZ remains a low probability outcome - though not an impossibility.

Sporadic 16 is located here.

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