Dairy's role in sustaining New Zealand - Fonterra

8 Dairy’s role in generating growth
Dairy exports and rural livelihoods
Any inquiry into the New Zealand economy and its workings has to at some point focus
on the central driving force of economic growth: trade. Trade is important because over
time New Zealand’s spending must equal its income. Without international trade the
income of New Zealand businesses is limited by domestic spending. International trade
removes this limit.
With dairy exports at 26% of goods exports, the impact of the dairy industry on
economic activity is considerable. The money that farmers spend in their communities
and in other parts of the country drives further economic activity – the more they earn
on international markets the more they spend in New Zealand. Dairy farmers’success is
mirrored not only in their local communities but also in the cities of New Zealand which
produce the goods and services that are bought by farmers. Even imports have a local
component since they have to be transported to the point of sale.
Nobody understands this more than the mayors of the districts, regions and cities of New
Zealand. Peter Tennent, Mayor of New Plymouth, says that “while the dairy industry in his
region only makes up 2% of the workforce, 100% of the community are the benefactors
of their efforts. When dairy farmers are smiling, the region smiles”. Hugh Vercoe, Mayor of
the Matamata Piako District, also knows how important dairy is to his district: “not only
are we reliant on the dairy [farming] industry, we have five dairy processing plants and
very active sale yards. This helps to maintain a vibrant community”. David Adamson, CEO
of the Southland District Council says that the dairy industry has “changed the face of
Southland”. He adds that “its economy has weathered the recession well, mainly because
of the influence of the dairy industry”.
In the first instance farmers spend their incomes on industries that directly support
their activities. They buy more cows, upgrade equipment, buy fertilizer, repay debt and
make land improvements. David Adamson suggests that this is the most visible sign
of the impact of dairy growth on the Southland region: “most of the money earned by
farmers is spun out into the community”. Since most of the goods and services come
from outside of the provinces, other communities benefit as well. In work done by
NZIER (2003) it is shown that it takes about 18 months for this economic ‘ripple’effect of
additional export revenue to fully work through the New Zealand economy, all of which
leads to stronger household spending and business investment.
What would New Zealand look like without the dairy industry? Peter Tennent finds it
difficult to imagine this situation but one thing he does know is that “New Plymouth
would not have been judged the best place to live on the planet by the United Nations
backed Liv.com Awards without the dairy industry … we’d still be smiling but not as
wide … and there’d be far fewer businesses here”. Similar sentiments are echoed by
David Adamson and Hugh Vercoe. Both said there would be fewer businesses, less
vibrant community, and fewer job opportunities. Not only would there be fewer job
opportunities and increased movement of people to the cities, those cities would also be
poorer.
The dairy industry has had a major impact on New Zealand society and economy for
over 130 years. Those involved in running districts and cities closest to the dairy industry
well understand the positive impact of dairying, not just on their regions and cities but
on the rest of New Zealand.