Photo / Mike Scott
Opinion: Investment in primary sector research and development will assist in maintaining our "slice of heaven", Dr Jacqueline Rowarth writes.
"May you live in interesting times."
What has been described as the translation of a Chinese curse is, in fact, a western and modern invention.
Probably the same is true of "May all your children be daughters". And in the same way that most people have come to accept that girls are as good as boys, and for different reasons, we also accept that if times aren't interesting, we're bored.
It is interest and challenge that increase motivation and resilience. 2020 both tested this and showed it.
The whole world saw New Zealand rise to the challenge, and New Zealanders saw that the primary sector continued to enable the country to have food and income. Remarkable.
In May 2019, a few months before Covid began its spread, Deloitte published a report on New Zealand. Shaping our slice of heaven was subtitled "Regions of opportunity" and covered projected (modelled) GDP (Gross Domestic Product) growth from 2019-2040.
It highlighted the fact that regional economic development "region by region" was insufficient: we need to understand the competitive advantage of each region and how the regions link together.
Deloitte then focused on the five regions of Auckland, Waikato, Hawke's Bay/Gisborne, Wellington and Canterbury, analysing potential growth in tourism, agribusiness, food processing and advanced manufacturing.
Over the period 2019 to 2040, Deloitte found that the economy would be $11.5 billion (4.3 per cent) larger in real terms if the five regions of focus did grow at the national export target set for tourism. In addition, there would be an extra 23,100 full-time equivalent (FTE) jobs.
If the five regions grew at the national export target for agribusiness, there would be an extra $4 billion contribution to GDP over the period, with an additional 6,500 FTE jobs created.
If the regions modelled grew to meet national export targets for food processing, national GDP would increase $10.6 billion and employment would grow by around 23,200 FTE jobs. (Food processing generally has agribusiness at its core).
Finally, achieving the national research and development target by increasing advanced manufacturing exports would boost GDP by $6.1 billion and add another 39,500 FTE jobs.
All this in just five regions covering less than half of New Zealand.
Of the four sectors, agribusiness appears to be contributing most to GDP per FTE, whereas advanced manufacturing could create lots of jobs but with a relatively low GDP contribution.
Since the report was released, tourism has suffered badly from Covid-19 restrictions, but agribusiness and food processing continued – not with quite the same productivity as pre-Covid because of social distancing and supply-chain interruptions, but at 93 per cent of pre-Covid activity during lockdown Level 3, and at 75 per cent during level 4.
These are Reserve Bank of New Zealand figures.
Accommodation and food services was cut to 19 per cent under level 3 and 11 per cent under level 4.
Only the government sector was on average at greater activity than agribusiness and food processing, managing 90 per cent during both levels. But government does not bring new money into New Zealand for circulating, whereas exports from the primary sector do.
In 2018, the New Zealand Institute of Economic Research analysed the flow on effects of the dairy industry for New Zealand.
Of the $18.7 billion coming into the country, approximately $5 billion was used in milk processing, business management, electricity and packaging, with $118 million going to community services.
Dairy farming received approximately $12 billion which was then passed on to support services including builders, fencers, accountants, bankers, supply companies (electricity, feed and seed, agrichemicals and equipment).
The people employed in management, processing, milking, support and supplies could then go to local shops, supermarkets and contractors for their own food and household needs, thereby keeping those employees and business owners in work as well.
Listen to Jamie Mackay interview Dr Jacqueline Rowarth on The Country below:
The money-go-round for dairy has been estimated by the banks as seven to eight times.
Deloitte's slice of heaven report was released before Covid-19 was discovered.
It used tourism as one of the poster industries because it had been growing rapidly and pointed out that although it could involve all regions in New Zealand, the opportunities and benefits would not be evenly distributed.
"Some regions may be better placed investing in other industries that draw on their strengths, including existing business clusters, natural advantages or logistics connectivity."
This is a good post-Covid message for the government – invest in the industries which showed resilience and played to natural advantages.
The other message from Deloitte to the whole of New Zealand is that we have a slice of heaven. We live in New Zealand.
During the year the World Happiness Report ranked us eighth of 153 countries. The Legatum Prosperity Index ranked us seventh overall of 167 countries, with a ranking of fifth for Governance, fourth for Natural Environment and fifth for Social Capital.
Economic Quality, however, has been dropping over recent years and we now rank 24th. Productivity and Competitiveness dropped four places to 52.
Deloitte summed up the challenges and opportunities back in 2019 and the interesting times of 2020 showed the reality: investment in primary sector research and development will assist in maintaining our slice of heaven.
• Dr Jacqueline Rowarth is an Adjunct Professor at Lincoln University. She is also a farmer-elected director of DairyNZ and Ravensdown. The analysis and conclusions above are her own. jsrowarth@gmail.com
David Seymour, Emma Higgins, Andrew Hoggard, Grant McCallum, Phil Duncan, Cheyne Gillooly.