Home, home on the range

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because we can’t afford to go out and play .

Fonterra’s announcement yesterday is very significant for the NZ economy because it tells a story we can’t ignore.

They announced that their payout to farmers would be $5 a kg. “Woop de woo” I hear you say, “what does that mean?”.

Well Fonterra is New Zealand’s biggest exporter by far and one of our largest companies. They “employ” most farmers in this nation.

In January 2008 the NZ dollar was 76 cents to the US dollar and their pay out to farmers was $7.66

Milk powder, cheese etc have increased in price way above inflation in the last 12 months, (cheese nearly 20%), but let’s just say they should have increased by 4%.

That means that this year the payout should have been $7.96 if our dollar remained the same.

Now when you’re exporting you love it when our currency drops because if you get paid in US dollars you make a lot more money right?

So today our dollar is 53 US cents, a drop of 30%, so the farmers payout should have been $10.35.

The announcement today said that a drop from the estimated $6.00 to the actual $5.00 effectively removed 1 billion dollars from the NZ economy.

But factor in the dollar and inflation and Fonterra’s income has dropped by over 50% and this removes FIVE BILLION dollars from the NZ economy. Not to mention the additional 5 billion just announced HERE

This is the impact of a global melt down.

Now today we have had a 1.5% cut in the OCR this morning so look forward to further interest rate cuts. We really are entering an incredible time of opportunity in New Zealand cashflow wise. More on that tomorrow.

Stay Safe ~ Dean Letfus @ www.MassiveAction.co.nz