We have been asked to provide an overview of the dairy sector’s economic contribution, focusing on:
GDP and exports contribution
Jobs and wages generated
Support for regional development
Opportunities from further trade reforms and export market development.
Dairy continues to make a significant contribution to the New Zealand economy. It:
Contributes $7.8 billion (3.5%) to New Zealand’s total GDP: comprising dairy farming ($5.96 billion) and dairy processing ($1.88 billion).
Supports rural New Zealand, with the sector accounting for 14.8% of Southland’s economy, 11.5% of the West Coast, 10.9% of the Waikato, 8.0% of Taranaki and 6.0% of Northland.
Remains New Zealand's largest goods export sector, at $13.6 billion in the year to March 2016. Export growth has averaged 7.2% per year over the past 26 years, faster than any primary industry apart from wine and wood and wood products.
Exports twice as much as the meat sector, almost four times as much as the wood and wood products sector and nine times as much as the wine sector.
Accounts for more than one in four goods export dollars coming into New Zealand, despite the recent price downturn.
Employs over 40,000 workers, with dairy employment growing more than twice as fast as total jobs, at an average of 3.7% per year since 2000.
Creates jobs at a faster rate than the rest of the economy in all but 5 territorial authorities across New Zealand.
Provides over 1 in 5 jobs in three territorial authority economies (Waimate, Otorohanga, Southland); and over 1 in 10 in a further eight (MatamataPiako, South Taranaki, Hauraki, Waipa, South Waikato, Clutha and Kaipara).
Delivered $2.4 billion in wages to farmers and processing workers in 2016.
Supports a range of supplying industries: in 2016 farmers spent $711 million on fertilisers and agro chemicals, $393 million on forage crops and bought over $190 million of agricultural equipment. Farmers also spent $914 million on agricultural services, $432 million on financial services and $197 million on accounting and tax services.
As well as taking farmers’ raw milk, the dairy processing sector also spends significant amounts on packaging ($288 million in 2016), hired equipment ($199 million) and plastics ($174 million).
We have also explored the potential for additional gains to the dairy sector from further trade liberalisation:
If all global dairy tariffs were eliminated, and New Zealand’s milk production is held constant, the value of New Zealand’s dairy exports would increase by $1.3 billion, generating a $1.03 billion increase in New Zealand’s nominal GDP.
In a separate modelling scenario, if global dairy tariffs increased from their average applied rate to their average bound rate, New Zealand’s dairy exports would fall by $2.3 billion, leading to a $1.66 billion fall in New Zealand’s nominal GDP. This provides an indication of the value of historical dairy tariff reductions due to multilateral, plurilateral and bilateral trade negotiations, or the benefits of preventing any backsliding towards trade protectionism.