AT least $200 million will be drained out of the south-west economy this financial year by the dairy industry downturn and towns right across the region are feeling the effects.
That’s the stark picture painted by a Warrnambool accountant specialist who has called for wider community support for lobby groups seeking government assistance for cash-strapped farmers.
Garry Smith, a partner in Coffey Hunt, has calculated that the average south-west dairy farmer will have $170,000 less cash flow than last financial year.
“It is one of the most significant rural industry downturns we’ve seen for a while,” he said. “There is an effect on retailers and services directly connected to dairy farming, but also flows through to many other businesses.”
Mr Smith’s calculations were echoed this week by Warrnambool City councillor Jacinta Ermacora who heard him speak at a conference in Warrnambool last month.
Cr Ermacora said it emphasised the importance of dairying to the region’s economy.
Yesterday Mr Smith said the sluggish retail economy was partly due to the dairying downturn.
“There is a general perception that some retail vacancies are running at a 15-20 year high,” he said.
“If you take the dairying money out of the retail economy it makes things difficult for them.
“It certainly is important for businesses in the region to get behind issues that Farmer Power and other rural bodies are raising, particularly in an election year.”
Mr Smith’s calculations were based on Dairy Australia figures combined with the estimated six cents a litre income drop for farmers and $100 a tonne higher grain prices affecting the region’s 1500 dairy farmers.
He did not factor in higher bills for electricity, insurance and rates or effects of the abnormally dry season.
“The effect of the lower milk price in the south-west is $132 million in lost revenue,” he said. “Then with the extra grain price there’s another loss of $70m.
“I’m seeing average increases of 50 to 80 per cent for electricity for my farm clients.
“Higher electricity costs also reduce profitability for processors and their ability to pass on better returns to farmers.”
He said although international markets looked more promising for next financial year there would be a time lag before processors could pass on the benefits to farmers.
Reduced cash flow affected farm profitability and ability to meet debts, he said.
“I’ve certainly seen increasing instances of pressure from banks on farmers with higher debt,” he said.