Dairy payouts see all Kiwis better off
A$1 rise in Fonterra’s payout to farmers makes every New Zealander about $270 better off, says a new economic report.
Fonterra and DairyNZ commissioned the New Zealand Institute of Economic Research to measure how much dairying and its exports are worth to the economy.
The findings showed dairy provided 26 per cent of New Zealand export returns, dairy farmers spent about 50c in every dollar they received on locally produced goods and services, and every tonne of dairy exports helped reduce the current account deficit, bringing down interest rates and reducing household mortgage payments.
The report said the dairy sector directly accounted for 2.8 per cent of GDP (or $5 billion).
This year’s $ 1.17/ kg in Fonterra’s payout to farmers would generate an extra $316 per person in New Zealand, it estimated.
Dairying employed 35,000 people directly and provided further work for 10,000 contractors.
The report said dairy production was ‘‘ hugely’’ important for many regional economies. It injected more than $700 million into the Southland economy last year, with South Taranaki and Matamata-Piako receiving well over $500m each.
In the Waikato region dairy production was worth $2.4b and employed more than 8000 people.
Of the $ 10.4b of dairy products exported last year, $7.5b was used to purchase raw milk from farmers, $1.5b was retained as wages and capital and $625m was spent on goods from New Zealand suppliers.
Fonterra chief executive Andrew Ferrier said the findings would help New Zealanders better understand that when dairying does well, New Zealand does well.
Of the $ 7.5 billion farmers received from Fonterra last year, $3.6b was spent on domesticallyproduced goods, including fertiliser, feed, agricultural services and financial services, he said.
‘‘There is no doubt that dairy has helped us out of the recession and the benefits extend well beyond the farm gate.
‘‘Export growth from the dairy sector has helped narrow the current account deficit and that helps everyone through lower interest rates on mortgages and other borrowings.’’
NZIER deputy chief executive John Ballingall said the institute’s modelling showed the dairy sector’s strength had been evident as the country recovered from the global financial crisis.
‘‘The export side of the economy has been relied on to generate growth and dairy has made a significant contribution.’’
MONEY MATTERS: The dairy industry contributes a quarter of New Zealand’s export returns.