Economics: A Weighty Anchor

As part of the analysis and forecasting necessary for preparing the Government’s Budget each year, economists at the Ministry of Agriculture and Forestry prepare set of forecasts and projections for major pastoral, horticultural and forestry export products. Having passed over their information to the Treasury, they incorporate it in twice-yearly report entitled “Situation and Outlook for New Zealand Agriculture and Forestry”.

The mid-year report this time around tells us that in the latest year to March, agriculture’s contribution to GDP increased by an estimated five percent to $8.42 billion. That’s an eight percent chunk of total GDP without accounting for transport, the processing of primary product and other added-value work beyond the farm gate.

The provisional free-on-board value of the country’s pastoral exports amounted to around $13.8 billion in the latest March year, up 17 percent from 2000/01 and equivalent to 42 percent of total merchandise exports during the year. By the end of 2006/07, pastoral exports are projected to be $14.5 billion.

Horticultural exports accounted for $2.2 billion, up nine percent from 2000/01 and seven percent of total merchandise exports. This is projected to rise to $2.5 billion by the end of 2006/07, due largely to rising wine export volumes.

We may assume the Treasury boffins dutifully absorbed figures like these and built them into their budget forecasts. We may also assume the boffins take the farm sector somewhat for granted, because it does not seem to have been mentioned in Treasury advice to the incoming Government on issues to be tackled over the next three years.

The Treasury is the Government’s lead economic and financial adviser, it says in briefing paper to the Minister of Finance of the new Government. Over the past three years, its officials have produced several papers as it examines how government policy can help New Zealand achieve higher living standards. The briefing paper “attempts to synthesise and crystallise where that work has got to”.

The paper emphasises the importance of economic growth; the need for an efficient, effective and innovative state sector; and the intersection between economic growth and environmental sustainability. These are not new areas of focus, the Treasury acknowledged, “but we think they are important areas where we need to make further progress if we’re to continue working towards higher living standards for New Zealanders”.

If the “find” function on your columnist’s PC was working correctly, the briefing paper makes no mention of “agriculture”, “farmers” or “farming”.

Two Opposition MPs, both championing the farm sector, perhaps did not notice how the Treasury had treated the primary sector and its role in the next three years. They did notice how agriculture was treated in the speech from the throne, which set out the Government’s programme and priorities for the same three-year period.

National agriculture spokesperson David Carter said the Government-crafted speech had waxed lyrical about the need for lifting the country’s sustainable rate of growth, but “agriculture didn’t rate mention”. He said the past three years had given the Government dream run, “and the reason for this has been the buoyancy and strength of the agricultural sector”.

But the dairy industry ominously was signalling $1.6 billion less income flowing into the national economy next year, he cautioned.

ACT rural affairs spokesman Gerry Eckhoff said agriculture “was not even mentioned in despatches” in the speech from the throne. “The Government has yet again deliberately snubbed rural New Zealand and its contribution to the New Zealand economy. This must emphasise the indifference this Government has to the goose that lays the New Zealand golden eggs…”

No other industry was capable of producing enough income to fund the Government’s social programmes, Eckhoff contended. “How else does the Government expect to fund huge increases in health and social spending?”

Federated Farmers’ chief executive Tony St Clair similarly said his organisation was “somewhat perplexed” that “the economic anchor of New Zealand has yet again been ignored by our politicians”.

Actually, the speech from the throne did mention “agriculture”, but only once and very fleetingly. The Government saw real economic opportunities as well as potential costs arising out of the Kyoto Protocol coming into force, the speech said. “Business will be assisted to identify such new opportunities with supporting research aimed at achieving emissions reductions for agriculture.”

Agriculture’s significance was seen very differently in an article contributed by Australia’s agriculture, fisheries and forestry minister, Warren Truss, to Japan’s The Daily Yomiuri about the same time as the speech from the throne was read. The article noted that representatives of governments, international organisations and non-governmental groups were gathering in Johannesburg for the World Summit on Sustainable Development and would be addressing wide range of global issues.

“Of these issues,” Truss insisted, “agriculture is key to the development of all the peoples on earth.” M

Bob Edlin is Management magazine’s regular economics writer.

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