Country needs rockstar sector to hit higher notes
New Zealand will need to boost its food and fibre sector and export more high-quality products to keep paying for social services as its population ages.
Contrary to popular belief, New Zealand isn’t an exporting economy, with data showing it has the lowest export intensity of the 24 OECD small countries.
Investment, collaboration and policies directed at long-term results will be needed to take advantage of the opportunity exporting offers the country.
This is according to a discussion paper released by the New Zealand Institute of Economic Research (NZIER) last week.
The paper, titled Pathways to Prosperity: Capturing more of the value of our food and fibre sector exports for New Zealand, was commissioned by the Helen Clark Foundation to understand how the country could provide the quality healthcare, education and superannuation New Zealanders expect with an ageing population.
By 2034, it’s expected there will be three working-aged people for each person aged 65 plus. It was four to one in 2022.
In 2021, the Treasury predicted that without policy changes, taxpayer-funded health funding would rise from 6.9% of the GDP in 2021 to 10.6% in 2061, while superannuation expenses were expected to rise from 5% of the GDP to 7.7% in 2061.
Author of the paper and NZIER chief development officer and principal economist Todd Krieble said: “You need to have the economic prosperity to fund the social prosperity.”
He said the paper focused on the food and fibre sector because of its size. It accounted for 80% of New Zealand’s exports, making it one of New Zealand’s main sources of income and tax revenue to fund public services.
“That has been the engine. They’ve been the star performers,” Krieble said.
The food and fibre industry included agriculture, horticulture, forestry, fishing and associated processing.
Sector leaders interviewed by the researchers said a lack of collaboration, lack of investment, the small scale of New Zealand business and labour issues were major hurdles to increasing productivity.
“We need to ensure we’re doing everything we can as a country to support the sector to grow its productivity and earn more from exports without putting more pressure on our people or our environment,” Krieble said.
The paper’s suggestions for doing this included developing a more skilled workforce, consumer-driven marketing, product development, investment in processing, improving management and governance, and strategic collaboration to create scale and larger investment pools.
Krieble and co-author Bill Kaye-Blake believed the sector needed “time and patient money – that is, investment and policies that do not demand immediate results”.
Minister of Agriculture and Trade Todd McClay said revenue from food and fibre sector exports was forecast to generate $54.3 billion this year.
Growing agricultural exports would play a key part in growing the economy and weathering challenges to public services, he said, with the government setting an ambitious target of doubling exports by value in 10 years.
The coalition Government was minimising administrative burdens on farmers, McClay said.
He was focused on getting “more value back to the farm gate, more money into farmers’ pockets, so that farmers can continue to adapt, evolve, and innovate”.
McClay recently announced a further investment in AgriZero NZ – a 50/50 venture between the Government and the agribusiness sector — for sustainability research, as well as funding a new venture specifically focused on a methane vaccine.
The coalition was considering policies around skills and education, immigration, foreign investment, innovation, regulation and infrastructure, to grow New Zealand’s economy, he said.
McClay considered secure access to water to be the biggest challenge facing the food and fibre sector and said the government was working to remove red tape around building water storage on farms.
Labour leader Chris Hipkins agreed that New Zealand needed to prepare for the future and how it would pay for health and superannuation, but said it was also important to invest in infrastructure for the future.
This meant continuing to invest in school property, hospital buildings and contributing to the super fund, he said.
The Government needed to be a leader in investing in research and development.