New Zealand's Primary Sector - Future Challenges

While the agriculture, horticulture, food and forestry industries can look to the future with some confidence, they will be influenced by our changing social, economic and environmental values which in turn will be influenced by domestic and international factors.

Economic

The international market conditions which have favoured much of the primary sector in recent years may dissipate in the coming year, but this will be cushioned to some degree by a depreciating New Zealand dollar. This net effect plus higher costs may reduce profitability in some areas of the primary industries.

The forestry industry will continue to face significant challenges from increasing competition in some markets, and higher energy, shipping and other costs. Structural and organisational issues within the industry will also be challenging.

Trade

We are a small, open and trade-dependent economy, and our export performance drives our economic growth and therefore our ability to meet social and environmental objectives. Exporting means we can leverage our innovation on international markets to exploit economies of scale and scope. This allows our businesses to constantly learn from overseas markets, consumer demands and competitors, and to identify and develop new sources of technology and innovation.

Trade liberalisation and market access are critical to the long-term success of our primary industries. The World Trade Organisation (WTO) Doha Round trade negotiations are a top priority for us. The government is also heavily involved in a range of free trade negotiations, including with China, Malaysia, Australia and ASEAN countries.

Our economy has generally been strong since the mid-1990s, with performance mostly above the Organisation for Economic Co-operation and Development (OECD) average. However, many of the markets in which we compete have traditionally been growing slowly or static, with barriers to trade and domestic subsidisation. We also face increased levels of competition - for example, from China and Latin America in horticulture and from countries such as Brazil and Argentina in meat and dairy.

Sustainable use of our natural resources

The primary sector's dependency on the sustainable use of land, water and biological resources is becoming ever more important both domestically and internationally. There is scientific consensus the world's single most important environmental problem is that of human-induced greenhouse gas emission exacerbating global warming. Agriculture, for example, is responsible for about 49 percent of our total greenhouse gas emissions. There is uncertainty about the detailed effects of climate change but what is clear is that there will be more frequent extreme weather events, gradual changes in more prominent weather patterns, loss of biodiversity and rising ocean levels. Over the longer term, there is potential for large scale damage to the environmental life-supporting systems that underpin our primary industries. Domestically, the effects of climate change are made worse by the decreasing quality and quantity of our natural resources.

Clean water is a scarce resource. The pressure on this resource is heightened by increasing competition between water use within the primary sector as production methods intensify and industrial, hydro-electricity, domestic and environmental use.

Issues which will remain challenging are water quality and allocation, sustainable land management, sustainable forestry, animal welfare, compliance with international and domestic regulations, freedom from harmful pests and diseases, food safety and suitability, and access to rural land for recreational purposes.

Biosecurity

Our economy relies on trade and tourism so freedom from pests and diseases is crucial to our economic success and standard of living. Increasing flows of passengers and goods across the border place greater pressures on our biosecurity system. Risks from emerging diseases are also increased by travel and trade. The recent SARS and avian influenza outbreaks have raised awareness of the risks of disease transmission.

Pests and diseases pose a significant threat to our remaining natural ecosystems (habitats and threatened native species). Having a robust biosecurity system will be vital in preparation for incursions from new pests and diseases, and to eradicate or manage those that are already here. Part of this preparation is to develop more effective methods of tracing animals and animal products through the production chain.

Food Safety within New Zealand

The increased rate of reported food-borne illness in New Zealand is of concern. In addition to the impacts on consumers suffering from food-borne illness, the Government is concerned at consequential damage to our economy, including risks to tourism and food export industries. The Government's expectations in setting up the New Zealand Food Safety Authority (NZFSA) reflect the contemporary needs of all stakeholders in food production and consumption in New Zealand. They include the priorities of reducing the incidence of domestic food-borne illness and ensuring all food for sale in New Zealand meets the highest standards of food safety and suitability.

Trade in food and related products represent a significant part of our GDP. A modern food regulatory programme must enhance food safety and suitability, provide consistent and flexible regulatory oversight across the "production to consumption" continuum, and ensure efficient use of government and stakeholder resources.

New policy and industry drivers

Due to an increasingly competitive international market and the constraints of the natural environment, the primary sector's future potential will rely more and more on its ability to find new uses for products and to extract the full value from dairy, meat, horticulture and other primary industries. In some cases, our businesses may need to take a more global approach, including sourcing products offshore to ensure continued supply to international markets. Some may also need to reconsider their industry structures, strategies and business models.

Economic transformation is one of the Government's three priorities over the next three years. The other two are national identity1 and families - young and old2. Central to realising the Government's three priorities is the knowledge that they are interdependent. More specifically, achieving economic transformation requires globally competitive businesses which are innovative and well connected, a highly productive workforce and efficient infrastructure, and much of this relies on effective partnerships between government and the primary industries. Some examples of the Government's involvement in sector development policy include the Forest Industry Development Agenda (FIDA) the Food and Beverage Taskforce engagement and a more active approach to sector strategies and initiatives in the dairy, meat, pipfruit and other industries. Increased effort is also going into developing adverse events policy.

Facing these challenges

Global and domestic challenges, together with the Government's priorities of economic transformation and national identity will shape MAF's priorities for the next three years. The priorities are:

Develop a framework and set of principles for sustainable development, to encourage economic growth which is environmentally sustainable.
Make a major contribution to the development of our response to human-aggravated global warming.
Continue, as a top priority, MAF's contribution to multi-lateral and bilateral trade negotiations.
Ensure harmonisation between trade, biosecurity and food safety functions, including ensuring effective co-ordination on Sanitary and Phytosanitary issues (SPS).
Implement new industry policy initiatives, including through the Food and Beverage Taskforce engagement and FIDA.
Undertake a study of forest and forestry policy with a view to developing clear policy directions reflecting the industry's environmental as well as social and economic benefits.
Develop a better understanding of the determinants of productivity growth in the primary industries and apply this understanding to policy development, new initiatives and priority setting.
Consolidate MAF's role in biosecurity, taking into account the need to protect the broader range of economic, environmental and social outcomes.
Prevent harmful pests and diseases from crossing our borders and manage the risks associated with the establishment of pests and diseases.
Complete the review of the food regulatory programme and fully implement the decisions arising from the review.

These initiatives have either been included within MAF's three strategic priorities − sustainable development, regulatory philosophy and frameworks, and technical rules in trade − or represent key work programmes for MAF's business groups.

Contact for Enquiries

Strategy and Performance Group
Ministry of Agriculture and Forestry
Pastoral House
25 The Terrace
PO Box 2526, Wellington

Tel: +64 4 894 0100
Fax: +64 4 894 0738 Contact this person