Westpac warns El Niño could curb New Zealand's primary sector and trim growth

Westpac warns that the emergence of El Niño conditions threatens New Zealand’s pasture-based agriculture, especially dairy, sheep and beef operations. Senior economist Michael Gordon explains that heightened drought risk in the country’s eastern regions and the upper North Island could curtail pasture growth, increase costs and disrupt processing throughout the season. He estimates that, in a worst-case scenario, the slowdown could reduce GDP by as much as one percentage point.

The ripple effects may extend to transport, food-processing and even raise the price of imported commodities such as vegetable oil. Although more livestock may be sent to processors during a drought, pushing meat prices down temporarily, prices could rise the following year as herds rebuild. Gordon adds that New Zealand farmers are better equipped this time, with greater irrigation coverage, stronger drought plans and favorable soil moisture compared with the El Niño-driven drought nearly 30 years ago.