Primary sector | Government Budget 2024

In our Election poll last year, together with Business New Zealand and Chapman Tripp, we saw that the primary sector was proving effective, with almost half of 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. Overall, the burden of regulation has increased the cost of doing business, climate policy has had a huge impact and, interestingly, skills and human capital have become a much bigger issue than in 2020.

These pressures have occurred against a backdrop of floods and droughts, rising input costs and weaker returns in some parts of the sector.

Nevertheless, it is difficult to overestimate the importance of the raw materials sector for the country’s economy. It supplies around 80% of New Zealand’s exports and feeds around 40 million people around the world.

The Government has five ministers from the three primary sector coalition partners speaking out about the value it places on the people, communities and businesses that make up the engine room of the economy.

The coalition agreements, in addition to the government’s 100-day plan and 36-point action plan, illustrate both the intent of change and the pace at which that change is occurring.

A number of initiatives are planned or underway on climate, technology, regulatory and governance issues, including regional cyclone and flood recovery requirements, methane targets, freshwater consents, freshwater farming plans and regional infrastructure.

There are initiatives in other sectors – such as changes to compulsory and vocational education – that could address concerns about the influx of skills and talent into the sector.

These are all aspects of ‘fasting the boat’ – and perhaps one of the government’s most ambitious goals is to double the value of New Zealand’s exports within ten years. There is no doubt that the primary sector, which accounts for 80% of exported goods, plays a huge role in this daring game.

It is no coincidence that Hon McClay is involved in both agriculture and commerce. New Zealand’s economic success depends on it being an outward-looking country, with international trade accounting for 60% of all economic activity.

The entry into force of the Free Trade Agreement (FTA) with the European Union, the commitment to strengthen bilateral relations with India and the start of talks on a free trade agreement with the United Arab Emirates point to a minister whose dance card is full and committed to revitalizing the relationship that contribute to increasing the value of our goods and services.

More can be done in the country to help the primary sector.

Five steps to valuable growth

Expect constant pressure investments in methane inhibition technologies and giving farmers tools to reduce emissions and overall improve the environment.

Some may see the government’s messaging as a relaxation of its commitment to reduce emissions from agriculture. The policy to keep the sector outside the ETS is due to be finalized by July and there is no clear direction on an alternative pricing mechanism, for example.

However, there is a clear thread of commitment to AgriZero^{New Zealand}, the New Zealand-Ireland Research Call on Agricultural Emissions and achieving net zero emissions by 2050. Simply put, the resources sector must remain engaged, especially as our trading partners and largest customers demand it. Access to markets in some of our largest supply chains is likely to be based on concrete, realistic and proven plans to transition to a low-carbon and environmentally positive economy.

Consistent with others research and analyzes we have carried outclear and consistent policy direction will provide investment certainty. We also know that the primary sector would like the government to define sustainable and acceptable practices to help businesses achieve net zero targets without over-regulating the ‘how’.

The basis for increasing value is also introducing goods to the market – for which strengthening regional resilience and local infrastructure is crucial. The Regional Infrastructure Fund, which is scheduled to be launched by the end of June, will have to aim to protect national production centers from extreme weather and climate impacts. It is also likely to focus on regional infrastructure projects that can increase production, value addition and employment in the primary sector.

As important as Physical resilience is mental resilience. This may be a long-term prospect, but increasing funding for mental health in rural areas – at a time when rural rates are rising, low farm prices and regulatory costs hang over many farm families.

Value can be destroyed in the blink of an eye due to a biosecurity breach. The threat of foot and mouth disease spreading from Indonesia to Australia – as we saw in 2022 – brings the specter of devastation closer to New Zealand. Additionally, climate change may also make the country a more hospitable environment for pests and diseases. More funding to maintain and strengthen biosecurity in New Zealand would be appreciated.

Budget courage is required in all of these areas. So perhaps not for now, but a joint effort can be made in the future investment in artificial intelligence improve productivity, overcome regulatory and natural resource constraints, and better meet growing consumer expectations.

We are increasingly seeing New Zealand’s competitors using AI as a tool to ensure high integrity and reliability of their core supply chains. From animal welfare in abattoirs to understanding market access hygiene, estimating yields and disease rates, AI can help New Zealand’s major producers stay ahead of demanding customer expectations and regulatory thresholds, while delivering economic benefits across our most important sector.