Farmers don't expect special treatment from this year's Budget, but some recognition of the impact that the drought has had on farm finances would be a welcome move, says Federated Farmers president William Rolleston.
Rolleston said many farmers - particularly dairy farmers - would face a high provisional tax bill this year, thanks to last season's record payout, at a time when many were contending with sharply lower prices and the impact of drought.
"It's unreasonable to pay high levels of provisional tax when quite clearly farm incomes are going to be down," Rolleston, a South Canterbury farmer, told the Herald.
Farmers throughout the eastern South Island are still feeling the effects of drought, particularly in North Canterbury. The region is likely to maintain its "medium-scale adverse event" classification until August or September this year.
The drought is likely to rekindle the debate about water storage and irrigation, and may warrant a mention in Thursday's Budget.
In the last two Budgets, the Government set aside $120 million to invest in major irrigation projects, through Crown Irrigation Ltd. It has also set up the Irrigation Acceleration Fund, which is investing $28 million in 18 projects around New Zealand.
Rolleston said the Government should consider tax deductibility for water reticulation schemes for those farmers who had fenced off their waterways to meet new environmental standards.
In the bigger picture, Rolleston said farmers wanted the Government to maintain tight budgets. "Continuation of fiscal restraint is what agriculture asks for, to make sure that we are not creating inflation pressure that might push the New Zealand dollar higher."
He said investment in infrastructure - particularly roading - had become more of an issue for farmers because maintenance of rural roads had become a big problem.
"We are seeing funding pulled out of those areas and that's going to make things difficult," he said.
Before last year's election, Federated Farmers called for an increase in research and development spending.
The farmer-funded DairyNZ and the Government have already invested in a number of partnerships and research and development projects.
DairyNZ chief executive Tim Mackle said the dairy industry had adopted a target of research delivering farm systems that increased production and increased profit by $110/ha a year while reducing the environmental footprint by 30 per cent.
"This would deliver a step forward in the challenge of farming within environmental limits while increasing economic benefits of dairying to the country as a whole," Mackle said.
DairyNZ is involved in a number of research hubs, such as the Lincoln Hub, to improve the links between the research undertaken by universities and the industry.
In other Budget news, the Government has restarted the Afforestation Grant Scheme. A new version of the scheme will see $22.5 million invested over the next six years to encourage the planting of an expected 15,000ha of new forest.
Under the previous scheme, from 2008 to 2013, more than 12,000ha was planted, much of it on erosion-prone land.