SYDNEY, May 25 (Reuters) - Australia said on Wednesday it would set up a A$555 million ($400 million) loan plan for dairy farmers hurt by cuts to milk prices, responding to an issue in the spotlight in rural areas during a federal election campaign.
The world's largest dairy exporter, Fonterra Co-operative Group Ltd FCG.NZ , and Australia's biggest milk processor, Murray Goulburn MGC.AX , both cut farm gate prices by up to 15 percent in recent weeks due to a global supply glut. farmers have warned the cuts will force them to slaughter cattle to raise cash, risking a fall in long-term production in the world's fourth-largest dairy exporter. The Australian industry is worth around A$2.4 billion.
Deputy Prime Minister Barnaby Joyce said the government would provide A$555 million that could be used for loans to farmers repayable over 10 years at discounted rates, as well as about A$20 million for services such as financial counselling.
"We have listened to the dairy industry and what they wanted was concessional loans," said Joyce, who is also Agriculture Minister. "This will keep the wolves from the door and the dignity in their house."
The conservative government of Prime Minister Malcolm
Turnbull has slipped behind the centre-left Labor Party ahead of the July 2 election, according to the most recent newspaper polling. On a two-party preferred basis - where votes for minor parties are redistributed to the two main blocs - the government trails Labor by a margin of 51-49.
($1 = 1.3906 Australian dollars)