Quake rebuild to put pressure on export sector

Updated at 6:43 am on 22 November 2012

Federated Farmers leaders has been told that the Christchurch rebuild is likely to bring fresh challenges for the export sector, including agriculture.

Westpac Bank chief economist Dominick Stephens told the federation's national council that there's huge optimism in Christchurch about the economic boom expected from the city's reconstruction.

But he said it's also likely to drive up building costs and interest rates and increase competition for resources such as labour.

Mr Stephens says during the last construction boom it was not the construction or real estate industries that found it difficult to get labour.

He said there was a lack of nurses and teachers and manufacturers and farmers also found it hard to get labour.

"Other industries basically had the labour poached off them because construction and real estate had the money."

Mr Stephens said construction is going to soak up the limited pool of resources available in New Zealand, leaving other industries having to compete for that limited pool of resources.

But on the positive side of the ledger for exporters, Mr Stephens said commodity food prices are on their way up again.

He says dairy usually rises first, meat later is usually the way it works.

Mr Stephens said the exchange rate is still too high, but that gap may be corrected by rising food prices.

He said the improved outlook has caused Westpac to lift its forecast for Fonterra's milk payout from $5.70 per kg of milk solids to $6.

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