Despite commentary focusing on the fall in the dairy payout from last year’s record high, a more rigorous analysis would take a slightly longer time horizon.  As the accompanying chart shows, a payout of $5.10 is in line with the long-term trend that has seen the payout rise an average 5.8 percent per annum since the mid-1970s.

Adjusting for inflation, a forecast payout of $5.10 would be slightly below the 35-year average of $5.25, but well within the range that has been experienced over this period.

Today’s announcement is just one of many ‘bad news’ stories that will continue to dominate the economic headlines for the foreseeable future.  But the long-term challenges and needs of the New Zealand economy remain unchanged.  New Zealand needs to remain open for business, with heightened investment in infrastructure and skills to set the platform for long-term improvements in productivity.