Arid conditions across the country that have led to a drought being declared in several North Island regions and kicked off early livestock slaughter threatens to derail agricultural production down the line, according to the Reserve Bank.
The dry conditions are weighing on the primary sector, and are expected to lead to weaker milk production in the latter half of the dairy season, the central bank says in its March monetary policy statement.
Because of that, animal slaughter is expected to increase in the first half of 2013, which will have "negative implications for production further out," it says.
"If dry conditions persist or intensify they could substantially reduce economic output more generally."
An official drought was declared across much of the North Island last week and low hydro lake levels have prompted the Bluff aluminium smelter to pare back production.
In his statement, RBNZ governor Graeme Wheeler says the "worsening drought conditions are creating difficulty in much of the country", though the full MPS report held little detail about the potential impact of the drought.
The central bank says the fourth quarter of 2012 showed stronger growth than expected and it doubled its forecast for gross domestic product to 0.8 percent in that period, while trimming 0.1 of a percentage point from the March and June quarters of 2013 to 0.6 percent and 0.7 percent respectively.
Deutsche Bank chief economist Darren Gibbs expected the Reserve Bank's forecasts to "make some allowance for lost production to date and note the possibility of further downward revisions if satisfactory rain does not arrive soon", he said in a note before the release.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- Spark partners with Netflix to boost flagging broadband share
- Bill English: Drug abuse preventing young Kiwis from working
- Crown argues it has power to revoke status of conservation land in Ruataniwha appeal
- Kiwi migration at lowest level in 30 years
- MARKET CLOSE: NZ shares gain on Metlifecare result
Most listened to
- New EO on regulations while cyber and ISIS fight to get boost, on Trump’s Beltway
- NZ's strong economy behind another record high migration figure
- Metlifecare's Glen Sowry on trying to be different from the competition
- Vector CEO Simon Mackenzie on how investment is subduing today's profits
- Villa Maria chief winemaker Nick Picone says the next few weeks' weather will determine the quality of this year's vintage