Latest / Best of Business / Nick Tuffley: ASB Chief Economist says New Zealand's economy could benefit from Fonterra sale

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Nick Tuffley: ASB Chief Economist says New Zealand's economy could benefit from Fonterra sale · Best of Business

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  Speaker 2: Having dealt with the alliance, doing met Boak this week
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  Speaker 2: next cab off. The old agricultural rankers, of course are
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  Speaker 2: the brand sale for Fonterra. I got a new report
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  Speaker 2: from ASB estimates the deal could unlock four and a
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  Speaker 2: half billion in additional spending. The flow and effects everywhere
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  Speaker 2: from manufacturing to retail to real estate everage farmer return
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  Speaker 2: could hit three hundred and ninety two thousand. Nick Toughley,
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  Speaker 2: asb's chief economist is back. Well this Nick morning to you.
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  Speaker 2: Come on, is this an economy mover?
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  Speaker 3: Look, it's certainly going to help when you ed up
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  Speaker 3: and look at the how that spending could flow through
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  Speaker 3: and stimulate spending and inncome another sectors and so on.
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  Speaker 3: You're talking about one percent of GDP over a period
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  Speaker 3: of time. I think the caveat is that the impact
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  Speaker 3: gets a lot more focus and sectors that are a
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  Speaker 3: bit more adjacent to where farmers normally spend their money.
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  Speaker 3: So we still think the Reserve Bank will need to
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  Speaker 3: tap rates a little bit freely just to help with
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  Speaker 3: that sort of broader economical capurey it. Hey, this certainly
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  Speaker 3: is going to help.
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  Speaker 2: What's your vibe around the debt v spend? In other words,
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  Speaker 2: how many paying down debt versus will go out there
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  Speaker 2: and have a party.
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  Speaker 3: We're roughly estimating it will be somewhere around like fifty
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  Speaker 3: to fifty in the sense that you will see a
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  Speaker 3: reasonable amount of debt retirement and savings built up. But
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  Speaker 3: you then also see on farm investments. You'll see that
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  Speaker 3: a personal spinning by farmers, and you may see some
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  Speaker 3: farmers that are you know, particularly ones that have been
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  Speaker 3: looking at retirement, moving off off farm and taking those
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  Speaker 3: windfalls elsewhere as well. So roffle effects through.
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  Speaker 2: I can't I mean, I don't know whether you can
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  Speaker 2: draw comparisons. I mean I always saw the Alliance deal
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  Speaker 2: going ahead because they were in a corner and they
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  Speaker 2: were stuck. It's not the same with Fonterra. But I
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  Speaker 2: equally see the deal going ahead. You don't turn down
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  Speaker 2: four hundred thousand dollars do well.
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  Speaker 3: We'll certainly be up to the farmers to decide what
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  Speaker 3: they're going to support, support it or not. We've got
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  Speaker 3: the votes coming through next week, and of course it
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  Speaker 3: does need regulatory permission to go ahead as well.
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  Speaker 2: That wouldn't be a problem, would it or what?
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  Speaker 3: I don't really see any particular reasons not to, but
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  Speaker 3: I'm just not the marior that I'm really that much
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  Speaker 3: of an expert in. But when you're looking, when you've
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  Speaker 3: seen independent reports of the offer price you know that
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  Speaker 3: have been done for the sort of farmers shareholders, that
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  Speaker 3: sort of suggests it's a pretty generous offer.
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  Speaker 2: In reading the spread, so three ninety two is the average,
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  Speaker 2: but there's sixty percent? Is it two or three hundred
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  Speaker 2: thousand dollars? I think I've written that done wrong, But anyway,
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  Speaker 2: the point is, is the spread of the payout of
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  Speaker 2: itself broad enough to make a genuine economic impact or
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  Speaker 2: a handful of people getting a shed loaded?
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  Speaker 4: Though, we did some calculations that suggest that you've probably
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  Speaker 4: got sort of upwards of sixty percent of farmers will
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  Speaker 4: get sort of at least two hundred thousand dollars catch
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  Speaker 4: wind full.
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  Speaker 3: So that's that's a fair chunk, and that's pretty significantly.
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  Speaker 3: You're starting to talk about a decent lot of win
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  Speaker 3: amount coming through there. So in terms of you know,
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  Speaker 3: fairly big decisions Okay, this is a good time to
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  Speaker 3: put some money onto the farm and invest in productivity
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  Speaker 3: or placing the milkshead. It's potential to have that sort
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  Speaker 3: of profound decision making impad.
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  Speaker 2: Just going back to the export numbers that we got
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  Speaker 2: a week, all this week, whenever it was, I can't
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  Speaker 2: remember how much actual lifting of the economy is dairy doing.
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  Speaker 3: Look, it's basically the number one still, so it's our
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  Speaker 3: very important export industry. We're still seeing the value of
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  Speaker 3: our dairy exports go up. And also we're still relatively
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  Speaker 3: resilient with our exports to the US as well, which
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  Speaker 3: is one reasonable market for us too. So look, this
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  Speaker 3: is where a fair chunk of money, not just dairy,
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  Speaker 3: but meat as well, and our fruit. We get a
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  Speaker 3: lot of revenue that filtered through into the economy.
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  Speaker 2: You have a good long weekend. Appreciate your expertise as always,
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  Speaker 2: Nick Tuffley, out of the ASP this morning.
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