"The adage is, 'When farmers are doing well, the local economy's doing well, too', and I think farmers will be looking after their rural suppliers.
"The farmers do regard Rotorua as being their town. They're building up quite an affinity with the place so that's good for everybody."
Farmers would be spending the additional money on rebuilding their assets and maintaining their equipment, he said. "What's left over will go on personal R and R."
If the forecast goes ahead, it will be the highest milk price ever paid to farmers, surpassing the record, set in 2010-11, of $7.60/kg.
The sector is now placed to receive $3.5 billion to $4 billion more in revenue, compared with 2012/13. A 30 cent revision announced last week will add about $500 million to dairy sector revenue this year.
Fonterra had been in damage control mode since China placed a temporary suspension on imports of whey powder, whey protein concentrate and dairy base powder, thought to contain bacteria that can cause botulism. It was revealed on Wednesday last week the scare was a false alarm but the scandal damaged New Zealand's farming reputation and cast doubt on the quality of our dairy products.
ASB chief economist Nick Tuffley said the forecast reflected recovering global dairy prices and resilience after the botulism scandal.
New Zealand still had a lot of work ahead to restore long-term reputational damage. But as the supplier of 90 per cent of China's imported milk powders, it was "pretty hard for China to suddenly turn around and import product from elsewhere".
The $7.80 price was $2 more than the previous season, and a "really good" windfall for dairy farmers.
However, rough times during the drought meant many farmers would be reinvesting back into their farms.
"We're not going to see farmers rushing out and celebrating with retail therapy, but putting some of that money back into productivity improvements on the farm." additional reporting, Jamie Gray