the beginning of the year while uk food price inflation recently reached 6 percent. in comparison, annual growth in new zealand ’ s food price index has been more muted, around 4 percent in annual terms. however, with dairy and other food prices continuing to increase there may be additional upward pressure on new zealand ’ s food prices in future. this has implications for monetary policy, which will be discussed later on. impacts of higher payouts on nz dairy industry higher dairy prices will flow through into a higher payout for new zealand ’ s dairy farmers. we estimate that fonterra ’ s recent upward revision to its payout forecast for this season and next will add an extra $ 2 billion to dairy farmers ’ incomes ( at current production levels ). just what farmers do with this extra income remains to be seen. the cash windfall is likely to be spread across repaying debt, increasing savings, upgrading equipment, buying more cows, fertiliser and other farm inputs, purchasing / converting land, and, to some degree, cars and holidays. there are also the downstream, multiplier effects to consider, which could see a bigger boost to the rural economy than the $ 2 billion payout increase alone would suggest. but let ’ s not forget the cost side of the equation. farmers often remind us that the cost of producing milk has increased substantially over the last few years. significant cost increases could dampen the overall impact of higher payouts on the rural economy. figure 11 : dairy payout and cost ( per kilogram of milk solids ) higher payouts may also spur a fresh wave of dairy conversions, which was certainly the experience following the record 2001 / 2002 payout. figure 12 : rural land use before the recent dairy price increase, dairy farm prices were looking very top - heavy, and hard to justify on the basis of expected payouts. the rate of increase has been even higher than for house prices. the commodity price increases may have saved some farmers from difficult liquidity positions. figure 13 : dairy land prices and house prices more conversions seem all the more likely considering the less favourable returns available from sheep and beef farming at present. the implications of a higher conversion rate would be another step - up in on - farm investment which would in turn lead to further increases in dairy sector debt levels. figure 14 : dairy sector credit changing land use would also bring fresh consideration of the environmental impacts arising from increasing milk production. examples include water allocation for irrigation in canterbury and the run - off

subsequent rise in international food and energy prices would still have led to headline consumer price index inflation exceeding 6 % now. in an absolute sense, actual and expected inflation is too high and needs to be reduced. subsequent monetary policy committee decisions have seen the ocr rise from 0. 25 % in august 2021 to the current rate of 4. 25 %. our actions display the monetary policy committee's determination and confidence in returning annual inflation to within our 1 % to 3 % target range. our focus on low and stable inflation is the best contribution we can make to the overall wellbeing of new zealanders. in a relative sense, new zealand is in a strong macroeconomic position relative to most oecd nations. we are around the lowest quartile for both inflation and unemployment relative to other oecd nations. we have a stable and well - functioning financial system that is resilient to a wide range of interest rate and employment shocks. and, as outlined in our most recent monetary policy statement, we have resilient household, public, and business sector balance sheets in aggregate. new zealand has a near record low unemployment rate of 3. 3 % and exceptionally high labour force participation rates. households have accumulated financial savings, with average household incomes rising in line with inflation. nominal wage rates have risen, with incomes further bolstered as people moved jobs to earn more, worked longer hours, or gained promotions. average hourly earnings growth for the private sector was 8. 6 % 1 in the year to september 2022, compared with consumer price index inflation of 7. 2 % in the same period. as interest rates rise, we expect spending to slow and unemployment levels to increase as more people join the workforce over the coming year. even with the expected slowdown in the period ahead, it is anticipated that the level of employment will remain high. large scale asset programme 2 / 7 bis - central bankers'speeches i'd like to briefly comment on the large scale asset purchase and funding for lending programmes which featured during the 2021 / 22 financial year. the review and assessment of monetary policy over the past five years showed that the large scale asset programme was highly effective in response to the liquidity crisis that emerged in early 2020 and in lowering longer - term interest rates. the funding for lending programme also gave banks confidence that a stable and secure funding source was available during a period of heightened financial market uncertainty. banks were able to continue their business of financial intermediation, avoiding a credit