Robertson Grant: Oral Questions — Questions to MinistersText is incorporated into the Bound VolumeRobertson Grant: Oral Questions — Questions to Ministers[Sitting date: 17 February 2016. Volume:711;Page:9065. Text is incorporated into the Bound Volume.]5.GRANT ROBERTSON (Labour—Wellington Central) to the Minister of Finance: What price per tonne of whole-milk powder in the Global Dairy Trade auction has been factored into the calculation that there is now a $17 billion shortfall from Budget 2015 and if this was not done what calculation was used to model the effect of “weaker dairy prices”?Hon BILL ENGLISH (Minister of Finance): Treasury does not forecast specific dairy product prices or results from the Global Dairy Trade auction—if only because it is in US dollars. Instead Treasury uses an index of New Zealand dairy export prices based on past experience. Between the Budget and the Half Year Economic and Fiscal Update Treasury lowered its dairy price forecast over the period through to June 2017 by between 15 and 20 percent—that is between the Budget and the half-year update. In total between the Budget forecast and the half-year forecast nominal dairy exports were lowered by a cumulative $1.3 billion over 5 years to June 2019. Most but not all of the recent price reductions had been incorporated into Treasury’s latest forecasts but we are likely to see further reductions when Treasury revises its forecast for Budget 2016.Grant Robertson: In light of the further decline in global dairy prices since the half-yearly update and the resulting further decline in revenue will he confirm that the $17 billion hole in his Budget just got bigger?Hon BILL ENGLISH: No actually because the $17 billion was the reduction in total GDP over 4 years in the half-year update. But of course alongside reductions in dairy prices we are seeing stronger immigration lower unemployment—Hon Nathan Guy: Tourism.Hon BILL ENGLISH:—stronger tourism and other prices that are higher than expected so we will just have to wait and see. But it could well be that there is no further reduction or it could be that any reduction is driven by for instance lower oil prices and lower inflation rather than lower dairy prices.Grant Robertson: If dairy is now of such diminished importance why was it the only sector specifically named in the Prime Minister’s statement in reference to the $17 billion hole in the Budget forecast?Hon BILL ENGLISH: Probably because at the time that that $17 billion was removed from the GDP forecast over the next 4 years it was probably the single biggest driver. In the next forecast it may not be the single biggest driver. It has already fallen quite some way and as I have pointed out there are other parts of the economy going very well in particular tourism and the export of services which is as big as the dairy industry. In fact through this year it may pass it in size.Grant Robertson: Has he sought assurances from banks in New Zealand about their approach to New Zealand dairy debt in light of projections of a third year below break-even payout and Federated Farmers saying one in 10 farmers is facing pressure from their bank?Hon BILL ENGLISH: In ongoing discussions with the banks myself the Minister for Primary Industries the Reserve Bank and Treasury—I think we need to keep in mind here that although prices have dropped further and look like they will stay low longer than was expected this is an industry that has a very positive long-term view about its prospects which is reflected for instance in the current land prices and it also has pretty solid balance sheets that can absorb losses—hopefully not for 3 years but certainly for 2 years. There will be some farmers with very high debt levels who will be under pressure unsurprisingly from their banks.Grant Robertson: Why have he and the Prime Minister insisted for month after month that dairy prices will come back very soon when they were warned in July 2014 that there was a 5-year oversupply of milk in the global market?Hon BILL ENGLISH: The best response to that I think is what was published in Treasury’s forecast which accounted for a significant drop in dairy prices. In retrospect there are all sorts of experts—in fact that is the only way the member seems to be able to demonstrate his expertise. Dairy prices are down—that is one factor of the global economy affecting New Zealand. There are others that are positive and fortunately we are one of the few developed countries with the prospect of steady moderate growth over the next 2 or 3 years despite lower dairy prices.Richard Prosser: What is his Government’s tangible financial plan right now to help farming families struggling with bank debts and the prospect of being thrown off the land rising farmer suicides—including those found hanging by Fonterra tanker drivers and those who phone our offices in tears talking about suicide—falling returns and the $167 billion in subsidies paid to their competitors in the US Europe and Japan which have just been enshrined by the Trans-Pacific Partnership agreement?Hon Gerry Brownlee: What a load of nonsense.Hon BILL ENGLISH: Well that dignifies it. For those farmers in extreme circumstances there are of course the various rural-based organisations around the country who are well organised and very attuned—Hon Nathan Guy: The rural support trusts.Hon BILL ENGLISH: —the rural support trusts—to the ongoing mood in the farming community. But the Government does not intend to initiate financial support for dairy farmers under pressure.