25 May 2011

Wider economy 'will benefit' from Fonterra payout

5:09 pm on 25 May 2011

A leading economist says the wider New Zealand economy will benefit from the record payout dairy farmers are getting from Fonterra.

The giant dairy co-operative, which processes about 90% of the country's milk, has confirmed it is on track for a payout of between $8.00 and $8.10 per kilogram of milk solids, including dividends, for the season ending in May.

ANZ chief economist Cameron Bagrie says spending in the agricultural sector does filter through to the wider economy.

He believes the bumper payout will be a game-changer, with some people feeling they can spend again.

Mr Bagrie says it could act as a springboard for a recovery in the second half of the year.

But a professor of farm management at Lincoln University, Keith Woodford, says much of the windfall will go to the banks, as about half of all farmers will use the money to pay down debt.

Federated Farmers say a wage increase for dairy farm workers is unlikely, as in the past year their pay increased by an average of more than 5%.