Farming’s importance reflected in statistics
Like blood to the body, agriculture is critical to the New Zealand economy. The sector makes economic contributions in direct and indirect ways, although measurement of such can be a tricky business.
The latest national accounts show agriculture GDP growing 7.5 per cent through the year to March 2012.
And yet all that showed up in the national accounts for agriculture GDP growth in the year to March was not much more than a bounce back from the previous year’s 5.6 per cent decline.
To be clear, we do not know if agriculture GDP has been understated or not over the past year. Our musings essentially stem from the reverse situation that occurred during the 2007-2008 drought.
As recently as March this year, the official agriculture GDP figures reflected a downturn, but not a particularly harsh one for such a widespread event. For example, in March this year agriculture GDP was considered to have fallen by 4.5 per cent between March 2007 and March 2008.
Statistics New Zealand has since completed a major overhaul of the national accounts. Suffice it to say, the history of New Zealand agriculture has been substantially rewritten, especially for the late 2000s drought period.
For example, according to the new data, agriculture GDP between March 2007 and March 2008 now shows an 18.6 per cent decline.
We suspect the bulk of these major revisions resulted from the inclusion of new annual benchmarks to 2009, from 2007 previously.
This raises the question of where agriculture GDP growth might sit for the 2011-2012 season when the annual benchmarks for that year are eventually included over the coming years.
If indeed agriculture is a lot stronger than currently shown in the national statistics, New Zealand as a whole could prove more resilient or stronger than the current national figures would have you believe.
The GDP revisions will flow through to official productivity calculations.
As the productivity figures stand, they show agriculture has been a standout performer.
Multifactor productivity in agriculture expanded more than 170 per cent between 1978 and 2010, or 3.2 per cent per annum on average. Multifactor productivity growth essentially represents the change in real GDP that cannot be accounted for by changes in measures of labour and capital inputs.
A recent report by the Ministry for Primary Industries (MPI) titled Pastoral Input Trends in New Zealand: A Snapshot highlighted some challenges of measuring such things as productivity, intensification and resource use in the dairy, beef and lamb industries. While a number of datasets were examined in that study and it illustrated productivity growth, MPI fully acknowledged that ‘‘data relating to the area of interest were limited’’. Fair enough. But this paper along with the national GDP revisions just goes to show how difficult it is to measure what has occurred overall in such an important sector of the economy. This is true even a few years after the fact let alone for those trying to understand it in real time.
BNZ Rural Wrap