Dairy doing well pays off for everyone


It's beyond dispute - New Zealand's 4.4 million cows are doing their bit for New Zealand's 4.39 million people, with high dairy export revenues supporting jobs, keeping interest rates down and enabling more government spending on essential services.

An independent report by the New Zealand Institute of Economic Research shows money from milk flows right through the economy, starting at the farm gate and moving out to rural and urban communities.

The report, commissioned by Fonterra and DairyNZ, shows that dairy farming provides 26 per cent of New Zealand's exports; a $1 rise in Fonterra's payout makes every New Zealander nearly $300 better off; dairy farmers spent about 50c in every dollar they received on locally produced goods and services; every tonne of dairy exports helps reduce the current account deficit, bringing down interest rates and reducing mortgage payments for homeowners; dairying employs 35,000 workers directly and another 10,000 contractors.

Fonterra CEO Andrew Ferrier said the report would enable people to better understand that when the dairy sector did well, the country did too.

"Most people understand dairy is a key export industry," Mr Ferrier said.

"Now they can understand what it means for them as the report accurately quantifies, for the first time, the tangible benefits to rural and urban communities."

An increase of $1 to Fonterra's payout boosts real incomes by about $270 for every person in New Zealand, showing everyone benefits when the company does well, the report says.

"Of the $7.5 billion farmers received in 2009, $3.6 billion was spent on domestically produced goods, including fertiliser, feed, agricultural services and financial services.

"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: "Our modelling shows that the dairy sector has delivered significant and ongoing benefits to the New Zealand economy.

"Its influence extends well beyond its direct impacts in dairying areas, with the sector closely intertwined with the rest of the economy. That includes the jobs it delivers, the income that these workers earn, its links to supply firms, the effects of rural economic growth on urban centres and the tax revenue it provides to fund public services.

"The sector's strength has been evident as New Zealand recovers from the global financial crisis and domestic recession. Given anaemic domestic demand, the export side of the economy has been relied on to generate economic growth and dairy has made a significant contribution."

DairyNZ chief executive Tim Mackle said that last year dairying kept 35,000 people directly in work.

"Our contribution to jobs is like having a city the size of Gisborne all working in the dairy industry. Urban centres also get a healthy share of indirect employment as they provide essential goods and services that are needed to produce dairy products."

Dr Mackle said the NZIER report showed dairy accounted for 26 per cent of New Zealand's total exports and it was looking to grow its contribution to the country.

"We've got a good track record of supporting regional growth ... The challenge for our industry will be in how we achieve this growth in a sustainable way," said Dr Mackle.

DAIRYING IN THE BAY OF PLENTY

- Regional dairy production was worth $605 million last year.

- Dairy revenue of $254 million in the Rotorua district.

- Bay of Plenty employs more than 3200 people directly in the dairy industry.

DAIRYING NATIONALLY

- Provides 26 per cent of New Zealand's exports.

- A $1 rise in Fonterra's payout makes every New Zealander nearly $300 better off.

- Dairy farmers spent about 50c in every dollar on locally produced goods and services.

- Every tonne of dairy exports helps reduce the current account deficit, bringing down interest rates.

- Dairying employs 35,000 workers directly and another 10,000 contractors.

- BAY OF PLENTY TIMES

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