Dairy's role in sustaining New Zealand - Fonterra

Key points
Dairy makes a very strong direct contribution to the NZ economy
• The dairy sector directly accounts for 2.8% of GDP, or $5 billion. This contribution is:
o greater than the GDP contribution of the fishing, forestry and mining sectors
combined
o around 10 times as large as the GDP of the wine sector
o about 3 times as large as the forestry and logging sector
o over a third of the GDP contribution of the entire primary sector (dairy and meat
farming and processing, horticulture, fishing, forestry, mining)
o 40% larger than the entire utilities sector (electricity, gas and water)
o 2/3 as large as the entire construction sector
o 15% of the total GDP of the goods producing industries and
o provides 26% of New Zealand’s total goods exports.
And contributes to the health of the NZ economy in many ways
• But the sector’s influence extends well beyond its direct impacts. Dairy is closely
intertwined with the rest of the economy. This includes the jobs it delivers, the income
that these workers earn, its links to supplying firms, the effects of rural economic growth
on urban centres, the tax revenue it provides and the public services that can be funded
from this tax revenue. These links are shown in the figure at the end of this section.
• Of the $10.4 billion of dairy products exported in 2009,
o $7.5 billion is used to purchase raw milk from the dairy farming sector.
o $1.5 billion is retained as returns to labour and capital (i.e. wages and rate of return).
o $625 million is spent on intermediate inputs from New Zealand. This includes $85
million of plastic containers, $45 million on electricity and $22.5 million on financial
services.
o Imported intermediate inputs account for $310 million – largely plastic containers
($182 million) and other food products to be used in processing ($30 million).
o $730 million is spent on retailing/wholesaling costs that get the dairy products from
the plant to market.
• Of the $7.5 billion value of raw milk output, $3.0 billion is retained as returns to land,
labour and capital. A further $3.6 billion is spent on domestically produced intermediate
inputs, such as fertilizer ($447 million), feed ($723 million), agricultural services ($446
million), financial services
Dairy’s role in generating growth
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