Agriculture and the primary sectors generate the vast majority of NZ's export revenue. The Labour Party has a proud history of leadership and hard decision-making across all the primary sectors.
From the formation of the dairy board to the removal of subsidies, the setup of the kiwifruit marketing board and the legislation to form Fonterra, Labour has delivered for farmers.
Labour's change to monetary policy will ensure export sectors are not constantly squeezed by increasing interest rates and a NZ dollar following those rates upward. It will be the single biggest change and benefit for all primary sectors from a new Labour Government in the short, medium and long term. Labour proposes to provide the Reserve Bank Governor with a variable savings rate tool that will enable him to reduce inflationary pressure by diverting excess money from the economy into compulsory savings without the need for a rise in the Official Cash Rate.
All the primary sectors rely on our natural advantage of young fertile soils and a mild climate with access to reliable water. The production of commodities, however, has delivered the inevitable roller coaster ride of returns for our primary producers and agribusiness-based companies. NZ is moving into a new era of strong demand for protein, and to a lesser extent fibre, in a world of fast-moving consumer products and expectations of high quality safe products.
Though we have been at the forefront of innovation, technology and hard work across our primary sectors it is now time to adapt to a new era where consumers are able to access huge amounts of information about the products they purchase and consume. Our production systems need to be at the forefront of quality, integrity and delivery of what those consumers demand. Biosecurity, animal welfare and environmental protection all form part of our New Zealand brand, widely respected by international consumers.
Unfortunately at present almost all the primary sectors have failed to develop a strategic approach to their future and that lack of direction is exposing NZ to some serious long term dangers.
Labour believes it is time for serious leadership and strategic thinking for each of our primary sectors under the guidance of visionary, strategic, and astute business leaders. Labour will appoint a Primary Sector Advisory Council to provide a high level of leadership and direction for ministers and government departments while leading in the development of strategic plans for the primary sectors. The precious and limited land area available for agricultural production, along with our valuable water resources and the skills of a highly educated workforce will be our pathway to future prosperity if co-ordinated and managed well.
Our vision must be a shared one where NZ is the producer of the finest quality safe protein and fibre products for the world's most discerning customers who are willing and able to pay a premium for our produce. A strategic vision that aims for high-value consumer and industry products is the only option for a country aiming for a non-subsidised, high wage, and highly productive work force and business sector.
Each of the primary sectors is challenged by the increasing focus on environmental sustainability and the increasing cost of production driven by demand for resources such as land and water and it is essential that NZ industry, banks and farmers invest in areas of the highest long-term returns for our efforts.
The success of the dairy industry has led to expansion in areas previously the domain of dry stock and forestry. Questions remain around the long term impacts of dairy on soil and water quality and the shrinkage of alternative land uses, such as dry stock, could inevitably lead to an unbalanced primary sector highly reliant on the international market prices for dairy protein.
A clearer direction that will assist investors and farmers to make the best decisions is needed urgently so we may uphold our national brand values that represent integrity, quality and sustainability.
Fonterra is our single biggest company and the leader in dairy sector production, environmental management and marketing. The current co-operative ownership model must be maintained and any outside investment carefully controlled. Increasing competition in the dairy sector must not be allowed to undermine the co-ordinated production processes and marketing model that has served our country so well.
Access to water, our most valuable natural resource and advantage, has opened up a whole new level of production in some areas of NZ, but has created unanswered questions around long-term environmental and social impacts on our rural communities. Labour has proposed a resource rental on water used for irrigation to enable reinvestment into areas of research, water quality improvement, community water availability and long-term water storage projects. Labour believes this is a sensible user-pays and investment strategy that will deliver real, measurable returns to the industry and wider community.
New Zealand signed up to the Kyoto Protocol and included agriculture in that commitment, made by a National Government in 1997. Labour remains committed to an all-gases, all-industries climate change policy. Campaigning by farmers against a proposed carbon tax led to the second-best option of an Emissions Trading Scheme which was implemented by the last Labour Government and further endorsed by the present National Party regime. It has failed to achieve the objectives of incentivising low carbon systems, and though Labour remains committed to the emissions trading scheme, changes must be made to give it credibility and positive influence on climate change behaviour. The transition details for agriculture to meet its objectives must be clarified and realistic to ensure our export sector can thrive while moving in a more carbon-friendly direction.
Since the year 2000, debt in the rural sector has ballooned from approximately $9 billion to well over $50 billion today. That investment has provided the opportunity for a large increase in production, but the cost of that debt remains constant in a world of changing commodity returns. High debt, particularly in the dairy sector, needs to be reduced. Any rapid downward movement in international dairy prices will expose a large number of leveraged dairy operations to unsustainable levels of debt repayment.
Banks continue to make record profits supported, no doubt, by the high level of debt in the rural sector. Farmers must be mindful of who is the net beneficiary of the growing number of high-debt, high-input farming systems. It is time for an assessment of the business model that has driven our land values and cost of production to levels that are difficult to sustain in the medium and long term.
The rapid rise in dairy production and conversions from dry stock farming has led to declining stock numbers and declining confidence in the meat sector that is still a very large part of our export economy. An increasing reliance on dairy industry grazing income to further support the static meat returns have assisted in a dilemma of over-reliance on dairy and shrinking employment, development and export opportunities for the red meat sector.
Pastoral beef, lamb, venison and goat meat should be at the forefront of our consumer export products. The absence of a co-ordinated production, processing or marketing strategy has left the industry floundering and opportunities lost.
Meat industry restructuring is essential and urgent if we are to maintain a balanced primary export sector and the National Government has failed to provide much needed leadership. The sector needs profit at all levels from farmer through to marketer, based on a premium high-value consumer product. A collaborative - if not united - approach is needed to deliver quality safe protein for the increasing number of customers able to pay New Zealand a premium price for that produce.
Labour in government will once again commit to making the hard decisions for the long term interests and sustainability of our primary sectors and thereby ensure a sound economy into the future.
Damien O'Connor is Labour's spokesperson for Primary Industries.