Dairy's role in sustaining New Zealand - Fonterra

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D Dairy’s role in generating growth It generates jobs • The dairy sector employs around 35,000 workers, excluding those who are self-employed (which could be up to 10,000 people). The sector will indirectly support many more jobs in industries that supply dairy, and that experience the benefits of additional income flowing into the region due to dairy volume and/or price growth. • It provides more jobs than each of the finance and accommodation sectors; around 65% more than the sheep and beef farming sector; 75% more than the fruit growing sector and double the jobs in the wood processing sector. • In districts such as South Taranaki, Waimate, Otorohanga and Matamata-Piako, the dairy sector directly accounts for between 1 in 4 and 1 in 5 of the total number of jobs in the region. • A $1 per kg payout increase results in the wealthier dairy sector and upstream and downstream industries employing approximately 4,600 more full time equivalent workers. It creates export earnings that improve Kiwis’ standard of living • Dairy exports were $10.4 billion in calendar year 2009, accounting for around 26% of NZ’s total goods exports. • This contribution far outstrips that of any other goods export sector. Dairy exports are twice those of the meat sector, over 6 times larger than all fruit exports, nine times larger than wine exports, twelve times larger than aluminium exports and 17 times larger than wool exports. • In fact, dairy exports are about the same as the sum of the next four largest export sectors: meat, wood, mineral fuels (oil) and fruit & nuts. • Through its export earnings, the dairy sector makes a positive contribution to narrowing the current account deficit. Without this export growth, New Zealand would have had to face increased foreign liabilities and interest on foreign debt. • A smaller deficit reduces New Zealand’s country risk premium on mortgage and other borrowing costs, which benefits all households and firms that are borrowers. • The volume growth in the dairy sector over the last decade has resulted in New Zealand households being a cumulative $6.4 billion better off than if dairy activity had stagnated at 1999 levels. • A $1 dairy payout increase delivers additional income of over $270 per year of additional spending per man, woman and child in New Zealand. This year’s increase of $1.17 per kg will generate an extra $316 per person in New Zealand. It fills the tax coffers • The dairy sector generates a substantial amount of tax revenue for the government, through the income taxes of farmers, corporate taxes of processors, and the GST and other taxes on the income and spending that dairy stimulates in the rest of the economy. • And because the sector has raised taxation revenue, benefits flow not just to the dairying districts but across the country as a whole. • Increased tax revenue coming in means more money to spend on essential services such as schools, hospitals and police. In 2009, these sectors are 0.7%, 0.6% and 0.2% better off because of the growth in the dairy sector over the past decade.
It drives many rural economies: “when dairy farmers are smiling, the whole region smiles” • Dairy production is hugely important for many regional economies. It injected over $700 million into the Southland economy in 2009, with South Taranaki and Matamata-Piako both receiving well over half a billion dollars. • For smaller district economies such as Ashburton ($471 million), Waipa ($361 million) and Selwyn ($270 million), the value of dairy production, relative to the total size of the economy, is likely to be significant. • As noted above, as many as 1 in 4 jobs in some rural areas are in the dairy farming and processing sectors. • The dairy volume expansion over the past decade has delivered an additional $650 of income per person in the Southland region and $590 per person in the Canterbury region above what would otherwise have happened. Northland ($110 per person) and the Waikato ($270) have also been major winners. • A $1/kg increase in milk solid prices delivers $170 per person of additional income in Northland and Taranaki, $130 per person in the Waikato and $140 in the Manawatu- Wanganui region. It benefits urban consumers too • Firms benefit from selling goods and services to the dairy sector. The average dairy farmer spends well over half of their income on goods and services to support on-farm operations. Many of these goods will come from urban areas. • Households benefit from the additional government spending that is facilitated by the tax revenue generated by the dairy sector. • They also pay lower mortgage and business borrowing costs due to the reduction in the current account deficit (and thus the interest rate premium on overseas funds) due to dairy export revenue. • The dairy sector’s strong export growth over the last decade has improved New Zealand’s balance of trade, and allowed for increased consumption spending. This export growth reduced New Zealand’s net foreign liabilities to GDP ratio by over 1%. Together with the exchange rate appreciation, this has saved households a cumulative $1.2 billion in interest repayments on foreign debt over the past decade. Dairy’s role in generating growth E
Page 1 and 2: Dairy’s role in sustaining New Ze
Page 3: Key points Dairy makes a very stron
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 and 32: Figure 9 2009 Gross regional produc
Page 33 and 34: Appendix A CGE modelling framework
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

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