Federated Farmers estimates that this season's record dairy payout will generate more than 4000 extra jobs.
The giant Fonterra co-operative, which processes about 90% of the country's milk, has confirmed it's on track for a record payout of between $8.00 and $8.10, including dividends, for the season ending this month.
That equates to $996,000 for the average farmer before costs and retentions by the co-operative.
Federated Farmers dairy section chairman Lachlan McKenzie says about 20% of farmers have high debt.
He says the dairy payout is holding up the economy and those farmers who are not paying back debt will boost the economy by spending.
One Southland farmer, Vaughan Templeton, says there's little evidence farmers are spending on new property or equipment, but are instead getting debt levels back to a more sensible level.
A professor of farm management at Lincoln University, Keith Woodford, estimates that up to half of dairy farmers are facing pressure from the banks to get their debt down.
Infometrics economist Gareth Kiernan says that is hampering the economic recovery but BNZ economist Doug Steel says it is reducing New Zealand's high dependence on foreign lenders which is a key economic vulnerability.
Lachlan McKenzie of Federated Farmers says if the current forecast holds up, New Zealand's dairy farmers will pay well over $300 million in direct taxation as well as tax on their shares in Fonterra.
Payouts strengthen ETS case - Greens
The Green Party says the payout strengthens the case for bringing agriculture into the Emissions Trading Scheme earlier than planned, as Labour has proposed.
Co-leader Russell Norman says the Environment Ministry has estimated that dairy farmers would pay an extra 2.5 cents a kilogram of milk solids if they were in the ETS, and with the payouts expected, he doubts many dairy farmers would notice the additional cost.
Labour leader Phil Goff also says farmers can afford to pay more to combat greenhouse gas emissions.
