Dairy's role in sustaining New Zealand - Fonterra

16 Dairy’s role in generating growth
The increased production in dairy draws in more labour, which is shown by the rise in
employment. Note however that, in our modelling, employment is assumed to vary much
more quickly than wages. In the short timeframe of this simulation we would not expect to
see much impact on wages because they have not had time to adjust. Similarly, while the
rate of return on dairy capital has risen, the level of capital in the industry has not yet had
time to accumulate.
Table 6 National results
Real percentage deviation from BAU levels
Indicator Percentage change Levels change,
$ millions
GDP 0.24% $400
Private Consumption 1.2% $1,200
Public Consumption 1.2% $360
Exports (volume) -1.8% -$1,000
Imports (volume) 1.4% $720
Employment 0.35% 4,600 FTEs
Hospitals Government 1.3%
Police Government 0.8%
Apple and Pear Competing export -3.0%
Sheep and Beef Competing export -0.4%
Textiles Competing export -1.3%
Source: NZIER
3.2.4 Regional impacts
The impact on the districts is in proportion to the importance of the dairy industry to the
region. The majority of New Zealand’s dairying is in the central North Island and that is
reflected in the strong growth of Taranaki, Waikato and the Manawatu. However, dairy is
also very important to the small Northland economy, which is why the large gains are seen
there. Districts that have strong red meat industries, such as Canterbury, suffer due to the
competition for resources from the growing dairy sector in this simulation. Similarly, districts
that depend on exports, such as Tasman’s wine and Auckland’s manufacturing, see low
growth due to the costs imposed by the appreciation of the exchange rate.
The impacts of a $1/kg price increase on per person consumption or living standards in each
region are shown in Table 7.