Dairy's role in sustaining New Zealand - Fonterra

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32 Dairy’s role in generating growth Appendix C Limitations of analysis • Aggregation bias. We have not split out the dairy sector, but use aggregated dairy farming and dairy processing industries. This leads to aggregation bias. For example, irrigated and non-irrigated farming practices and industry structures are likely to be quite different, and at present this is not captured within our modelling. Given adequate time, the model can be disaggregated to more accurately model the specific dairy sector. • Foreign debt accounting. We employ a standard ‘MONASH’method for accounting for the foreign debts – changes in net foreign liabilities come about if our investment is not met by domestic savings. We pay interest on foreign debt that is subtracted from national income. The interest, in foreign currency, is converted to domestic currency by the exchange rate. In this simulation, the exchange rate appreciation leads to a decrease in the domestic currency value of the interest repayments. It could be argued that much of the interest on this foreign debt is likely to be dividend payments on equity. In this case, the appreciation of the exchange rate should not decrease overseas payments. • ‘Top-down’ regional modelling. Regional data is by far the most difficult data to obtain across the diverse range of industries and commodities that we have incorporated within our model. ‘Bottom-up’regional modelling provides a clearer picture of regional activity and in-particular cross-region flows, however requires significant data resources. The topdown approach here provides indicative regional splits. • Model structure. The CGE model is based on Statistics New Zealand Input Output tables, with decisions based on neoclassical economics. Structural changes to the economy from the reforms are therefore not captured in the modelling, nor are any non-competitive market structures. This means the distributional elements of the results may differ in reality if firms with market power do not pass on benefits.
Appendix D References Bandara, J. S. (1991). ‘Computable General Equilibrium Models for Development Policy Analysis in LDCs’. Journal of Economic Surveys 5, no. 1 (1991): 3-69. Coleman, W. (2008). ‘Gauging economic performance under changing terms of trade: real gross domestic income or real gross domestic product?’ Economic Papers, Vol. 27 no.4, December 2008, pp. 329-343. Dixon, P. B., J. R. Madden, and M. W. Peter. (1993). ‘The effects of reallocating general revenue assistance among the Australian states’. Economic Record 69, no. 207 (1993): 367–381. Dixon, P. B., and B. R. Parmenter. (1996). ‘Computable general equilibrium modelling for policy analysis and forecasting’. Handbook of computational economics 1 (1996): 3–85. Dixon, P. B., B. R. Parmenter, and M. T. Rimmer. (2000). ‘Forecasting and policy analysis with a dynamic CGE model of Australia’. Contributions to Economic Analysis 248 (2000): 363–406. Dixon, P. B, M. R Picton, and M. T Rimmer. (2005). ‘Efficiency effects of changes in Commonwealth grants to the states: A CGE analysis’. Australian Economic Papers 44, no. 1 (2005): 82–104. Dixon, P. B., and M. T Rimmer. (1999). ‘Changes in indirect taxes in Australia: A dynamic general equilibrium analysis’. The Australian Economic Review 32, no. 4 (1999): 327–348. Dwyer, L, P. Forsyth, and R. Spurr. (2005). “Estimating the Impacts of Special Events on an Economy’. Journal of Travel Research 43, no. 4 (May 1, 2005): 351-359. http://jtr.sagepub.com/ cgi/content/abstract/43/4/351 Horridge, 2008. ‘Orani-G: A generic single-country computable general equilibrium model’. CopS/IMPACT Working Paper op-93; Centre of Policy Studies, Monash University. First Published 2000. Revised 2008. Mules, T. (1999). ‘Estimating the economic impact of an event on a local government area, region, state or territory’. Valuing tourism: Methods and techniques. NZIER. (2003). Globalisation a New Zealand perspective. CEDA chapter March 2003. Dairy’s role in generating growth 33
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 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: Table 12 IO vs. CGE multipliers Mul
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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