Farmers' interest payments on the up

17:00, Jun 13 2014

Indebted farmers will pay an extra $300 million in interest over the next year.

Total farm interest payments will rise from $2.4 billion to $2.7b, according to figures from the Ministry for Primary Industries. Farm debt now stands at $52b, around two-thirds ($32b) of it in dairy farms.

Federated Farmers president Bruce Wills said while farming was in good heart, some levels of debt were worrying.

The Reserve Bank noted around half the dairy debt is held by 10 per cent of farmers.

"With 2014/15 set to be more of a challenge, we need a business-friendly environment, with policies supportive of agriculture rather than policies that will harm it," Wills said.

Carbon tax, resource rentals tax on water, and a capital gains tax would "only further cripple" productivity.

He said the MPI report on the future of primary industries was a reminder of the importance of exports to New Zealand.

Dairy and forestry had been the star performers, with a 31 per cent and a 14.5 per cent increase respectively. Lower commodity prices forecast for 2014/15 would cut those exports by 4.8 per cent. However, exports should resume their rise in 2017/18, Wills said.

The Reserve Bank's increase in the OCR came as no surprise but it risked underpinning the high exchange rate and delaying its correction to reflect lower commodity prices.

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