And it’s on the table: Key considerations for the primary sector ahead of Budget 2024
In our Election Survey with Business New Zealand and Chapman Tripp last year, we noted the primary sector had turned out in force, with nearly half the respondents coming from agriculture, forestry and fishing.
On the eve of the 2023 General Election, the primary sector was feeling the pressure on all fronts. The burden of regulation in general had increased the cost of doing business, climate-related policy was having a huge impact, and – interestingly – skills and human capital had become a much larger concern than it had been in 2020.
This pressure was against a backdrop of floods and drought, the rising costs of inputs and poorer returns for some parts of the sector.
Despite this, it’s hard to over-estimate the importance of the primary sector to the country’s economy. It contributes around 80% of New Zealand’s exported goods and feeds around 40 million people across the globe.
The Government has five Ministers from the three coalition partners covering the primary sector, speaking volumes to the value it places on the people, communities and businesses comprising the engine room of the economy.
The coalition agreements, in addition to the Government’s 100-day plan and the 36-point action plan, illustrate both the intent of change and the pace at which that change is moving.
Across climate issues, technology, regulation and governance, a raft of initiatives are either planned for or underway, including regional requirements for cyclone and flood recovery, methane targets, freshwater consenting, freshwater farm plans and regional infrastructure.
There are initiatives in other sectors – such as changes to compulsory and vocational education – which may address concerns around the pipeline of skills and talent coming into the sector.
These are all aspects of ‘making the boat go faster’ – and perhaps one of the Government’s most ambitious goals is doubling New Zealand’s exports by value within ten years. That the primary sector, at 80% of exported goods, has a huge role in this bold play, is a no-brainer.
It’s no coincidence Hon McClay holds both the Agriculture and Trade portfolios. New Zealand's economic success depends on being an outward-facing nation, with international trade comprising 60% of all economic activity.
The entry into force of the Free Trade Agreement (FTA) with the European Union, a commitment to furthering the bilateral relationship with India, and the launch of FTA discussions with the United Arab Emirates, all point to a Minister whose dance card is full, and is committed to energising the relationships that contribute to boosting the value of our goods and services.
Back home, more can also be done to help the primary sector.
Five steps to value growth
Expect to see a continued push into investment in methane-inhibiting technologies and getting tools into the hands of farmers – across emissions reductions and environmental improvement in general.
Some may see messaging coming out of the Government as a loosening of the commitment to drive down agricultural emissions. Policy to keep the sector out of the ETS is set to be finalised by July, and there is no clear direction on an alternative pricing mechanism, for example.
But there is a clear thread of commitment to AgriZeroNZ, the New Zealand-Irish Research Call on agricultural emissions, and to delivering net zero by 2050. Quite simply, the primary sector must stay committed, not least because our trading partners and largest customers are demanding it. Markets access to some of our largest supply chains will likely rely on tangible, realistic, validated plans to transition to a low-carbon, nature-positive economy.
Consistent with other research and analysis we’ve conducted, clear and consistent policy direction will provide confidence to invest. We also know the primary sector would like to see the Government define sustainable and acceptable practices, in order to help businesses achieve net-zero targets without over-regulating the ‘how.’
Also fundamental to raising value is getting goods to market – for which boosting regional resilience and local infrastructure is vital. The Regional Infrastructure Fund, set to be launched by the end of June, will need to be aimed at ensuring the country’s productive hubs are protected against extreme weather and climate impacts. It will also likely focus on regional infrastructure projects which can boost production, add value, and increase employment in the primary sector.
Equally important as physical resilience is mental resilience. It may be a long shot but boosting funding for rural mental health – at a time when rural rates rises, low farmgate prices and the cost of regulation, hang over many farming families.
Value can be wiped out in a heartbeat with a biosecurity incursion. The threat of foot and mouth disease spreading from Indonesia to Australia – as we saw in 2022 – brings the spectre of devastation closer to New Zealand. In addition, climate change can also make the country a more hospitable environment for pests and diseases. More funding to sustain and beef up New Zealand’s biosecurity protections would be welcome.
Across all these areas, boldness on a budget is required. So perhaps not for now, but for the future, could be a concerted effort in investment in artificial intelligence to improve productivity, navigate regulation and natural resources constraints, and better meet increasing consumer expectations.
More and more, we are seeing New Zealand’s competitors adopt AI as a tool to ensure their primary supply chains have high integrity and trustworthiness. From animal welfare in abattoirs, to understanding market access hygiene, yield estimation and disease prevalence, AI has the ability to help New Zealand’s primary producers stay ahead of demanding customer expectations and regulatory thresholds while delivering economic benefits in our most important sector.
