Inflation of concern to farmers

Federated Farmers is concerned the highest inflation levels for 21 years will add upside pressure on the New Zealand dollar.

“Certainly, farmers will be concerned at the one percent increase in the Consumers Price Index (CPI) for the June 2011 quarter,” says Bruce Wills, Federated Farmers President and economics and commerce spokesperson.

“Inflation is a major business concern because it affects the confidence to invest. While the Real Estate Institute’s latest farm sales data showed the number of farms being sold has increased, the median price per hectare has slid to its most affordable level since July 2004.

“Yet it’s that 5.3 percent increase in the latest CPI for the year to the June, which has overshadowed last week’s positive increase in Gross Domestic Product (GDP). This is also the largest CPI increase since June 1990.

“We’re noticing inflation with what we buy for our farms. While food contributed to the latest CPI increase, the agricultural sector had very little to do with it.

“Vegetables increased by 6.7 percent but that was cancelled out by fruit falling by 9.2 percent. Meat, poultry and fish recorded a modest 0.1 percent increase while there was a 0.1 percent fall in milk, cheese and eggs.

“The big increases in the latest CPI came from ‘grocery food’ and non-alcoholic beverages.

“While the Reserve Bank has looked through past increases due to policy changes like GST, ACC and the Emissions Trading Scheme, there’s a worrying persistence with inflation.

“Despite the tentative green shoots of recovery seen in GDP, today’s CPI heightens speculation the Reserve Bank may revisit the Official Cash Rate.

“The challenge is to reduce inflation without causing another recession. To do this, wider government policy needs to mesh with the Reserve Bank attempting to make the economy more productive and competitive,” Mr Wills concluded.