Dairy's role in sustaining New Zealand - Fonterra

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24 Dairy’s role in generating growth 5. Conclusion Our modelling shows that the dairy sector has delivered significant and ongoing benefits to the New Zealand economy. Two historical case studies, based on events of the last decade, illustrate how tangible and widely known changes to the dairy sector have flowed through to the rest of the economy. Volume and price growth in the sector has delivered benefits to a wide range of sectors outside of the dairy industry, and has generated living standard improvements across New Zealand’s regional economies, including in metropolitan areas such as Auckland and Wellington.
Appendix A CGE modelling framework A.1 The MONASH-New Zealand CGE model: overview The MONASH-NZ dynamic CGE model contains information on 131 industries and 210 commodities in its basic form. CGE modelling is a highly-respected and well-developed technique that has a rich history for assessing policy, regional and industry questions. Our model was developed in close collaboration with Monash University, a global leader in building and applying CGE models. It captures the various inter-linkages between these sectors, as well as their links to households (via the labour market), the government sector, capital markets and the global economy (via imports and exports). A visual representation is shown in Figure 10 highlighting the complex and multidirectional relationships between the various parts of an economy. For this study we have calibrated the dairy industry in our database to match the aggregate dairy industry figures provided by Fonterra and Dairy NZ. More technical detail on the model is presented below. The model also includes a regional component. A ‘top-down’approach is used to decompose national impacts to the regional level, using regional employment data as weighting. If a region has a high share of national output, then its regional industry output will be proportionally affected. The exception is industries that produce commodities (mostly services) that are largely consumed within a region. These are deemed to be local industries, and it is assumed that their output moves in line with the local demand for the corresponding commodity, rather than with the national industry output. Final This report captures - 16 November 2010 “regional multiplier”effects: spending within a region specifically benefits services with that region (Horridge, 2008). Figure 10 Components of a CGE model Figure 10 Components of a CGE model Source: NZIER A.2 Dynamics of the MONASH-NZ model Dairy’s role in generating growth MONASH-NZ is a recursive dynamic CGE model based on the ORANI-NZ core. It 25
Page 1 and 2: Dairy’s role in sustaining New Ze
Page 3 and 4: Key points Dairy makes a very stron
Page 5 and 6: It drives many rural economies: “
Page 7 and 8: Contents 1. The current contributio
Page 9 and 10: 1. The current contribution of dair
Page 11 and 12: Table 2 Export values $ millions, 2
Page 13 and 14: Figure 3 Importance of dairy to reg
Page 15 and 16: Table 3 Farming industry structure
Page 17 and 18: 2. Modelling dairy’s economic con
Page 19 and 20: Figure 5 Change in milk solids pric
Page 21 and 22: 3. Milk solids price spike 3.1 Head
Page 23 and 24: Table 5 Indirect impacts 2010 Perce
Page 25 and 26: Figure 7 Gross regional product imp
Page 27 and 28: 4. Production growth over the last
Page 29 and 30: Table 9 Indirect impacts 2008/09 Pe
Page 31: Figure 9 2009 Gross regional produc
Page 35 and 36: Figure 11 The MONASH-NZ database Fi
Page 37 and 38: At the activity level, intermediate
Page 39 and 40: Table 12 IO vs. CGE multipliers Mul
Page 41 and 42: Appendix D References Bandara, J. S
Page 43 and 44: Farming Milk & cream Ice cream Chee
Page 45 and 46: Farming Milk & cream Ice cream Chee
Page 47: Appendix G Changing dairy export ma

Dairy's role in sustaining New Zealand - Fonterra

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