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President’s Address to Federated Farmers

Tom Lambie - President’s Address to Federated Farmers of New Zealand (Inc) 58th Annual Conference Mercure Auckland Hotel, 15 July 2003

Ladies and gentlemen it is my pleasure to give the 58th Annual President’s address to this Federated Farmers of New Zealand conference. I have just returned from a visit to Freiburg in Germany and to Mexico City. The trip to Mexico had been planned as part of the Ministry of Foreign Affairs and Trade program of strengthening relationships with Mexico. The other visit was in response to an invitation from the German national farmer organisation. Both these events have one thing in common. The audience wants to know how New Zealand farmers are coping since the massive restructuring of the 1980’s.

For most of us that was the best part of twenty years ago and we have been so busy getting on with farming that we have put much of that behind. But the European farmers are only really starting to consider the reality of the changes likely to result from unwinding the massive market distorting Common Agricultural Program.

Having been forced to think back on how New Zeeland farming has changed two themes comes to mind and that is risk management and facing change.

In terms of managing risk this year has been one of the most challenging for the New Zealand farming community for a number of years. But as farmers, we have become used to constantly adapting our business to deal with risk. As I travel overseas and talk to farmers about the evils of relying on government handouts to manage your business risk I realise that we don’t stop and reflect enough on what a good job New Zealand farmers have been doing. We do not rejoice in the accomplishments that we have achieved or recognise the way we have adapted to a world of constant change. This past season has been a classic in that regard. With significant falls in product prices and the insidious impact of drought in many areas, farmers have had to cope with lower incomes and often-higher costs. Farmers have adjusted their production methods, optimised inputs to fit the new situation and for some used equity to get through the year. Federated Farmers cannot remove the risk for the business of trading in the international marketplace but we can fight to stop that task being made harder by domestic and international government policies. As I said earlier I have just returned from addressing 2000 delegates who represent the 450,000 farmer members of the national German farm organisation. My topic was the WTO and CAP reform. This German farmers’ organisation has an annual budget of $NZ45 million but despite its wealth I did not feel that the organisation was preparing its farmers well for the years ahead. Sure, they have been very successful in holding back some of the forces of change and succeeded in taking some of the risks out of farming. Subsidies have stabilised some prices and in the past increased farmer incomes. However, the winds of change are blowing. European enlargement and capped subsidies mean that things must change. The question is how well prepared are they to deal with the changed market conditions?

To their credit it appears that the German farmers will adopt the decoupled approach of the CAP reforms. This means farmers will no longer be constrained to grow specific crops to receive specific payments but instead will receive a single payment. This should mean that European farmers will turn their production decisions to meeting market demands. But they will still be beholden to government. They are in a weak position to argue against the prescriptive rules and regulations imposed at home which undermine their competitiveness. So they look to the WTO rules and regulations to help them. Therein lays the risk for New Zealand farmers. We need to clearly demonstrate to the rest of the world that increased wealth and improved environmental outcomes comes from allowing farmers to produce to their natural advantage in response to what consumers demand. It will not be delivered from unaffordable rules and regulations. With the WTO round in full swing and some movement in CAP reform there is some reason to be hopeful that further moves to trade liberalisation will be achieved to benefit the standard of living of all New Zealanders. The Uruguay Round made a huge leap forward. In the agriculture sector alone New Zealand paid $391 million less in tariffs in 2000 because of the Uruguay Round. But much more is needed.

We look to a further reduction in tariffs and quotas from the $2 billion a year our exporters pay.

Whilst some in New Zealand mourn the loss of protective import tariffs on clothing the average New Zealand household has saved $700 every year and yet the value of exports from our clothing industry has quadrupled from $41 million in 1986 to $170 million in 2001. I must acknowledge the tireless work of Minister Sutton as he travels the world looking to promote multilateral moves towards international trade liberalisation. Progress is excruciatingly slow, but farmers can be confident we have a committed advocate. Having just returned from a whirlwind trip to Germany, Mexico and back I think I now appreciate the physical demands of all that travel.

Minister Sutton has also been the driving force behind New Zealand’s ongoing commitment to protecting our borders from unwanted pests and diseases. Many of you took the opportunity to inspect our border facilities yesterday. The importance of this work cannot be overstated. The reality of 20,000 job losses and a $10 billion drop in GDP in the event of an FMD outbreak is incentive enough to justify the resourcing of biosecurity to the same levels as other security agencies. The Biosecurity Strategy due out later this month must provide a comprehensive and co-ordinated response to New Zealand’s ever growing biosecurity threats.

And while I am giving our bouquets I would like to thank the Minister for the Environment who has recognise the value of working with landowners on a voluntary basis to protect the biodiversity of private property. Hon Marian Hobbs has increased funding for the QEII Trust from $2 million this year to $3.2 million by 2005 and the New Zealand Landcare Trust will receive $1.8 million in funding over the next four years

Exotic pests and diseases, glacial movements in the WTO round and Australia getting a free trade agreement with the US ahead of New Zealand are but some of the risks that we farmers have to contend with.

After a phenomenal 2001/2 season, this past year has been hard going. Drought, lower prices, a high NZ dollar. SARS, subdued international growth post September 11 and the War in Iraq have all taken their toll. Next year is not looking much better. Farm gate returns for sheep and beef farmers are set to decline by $330 million to $4.1 billion in 2003-4. This follows a $480 million decline for the farming year ended 30 June 2003.[1] This is on top of the more than $1 billion reduction in farm gate dairy prices. If we were farming pre1984 and faced the economic outlook we see to day. I suspect we would have been pushing for strengthening stabilisation regimes, market interventions and Government support. We might have been sounding like certain film directors calling for special tax deals or like a certain yachting crew calling for handouts. But we are not.

There is no doubt about it New Zealand farmers have made the big adjustment. In the last twenty years we have become more business focussed and make investment decisions based on our individual strengths and the natural strengths of our farms. We have shown we are able to compete with highly subsidised producers in the international marketplace even when hampered by market access restrictions and outrageous tariffs. We monitor carefully our inputs and carefully control our costs. Our on-farm productivity continues to outstrip every other sector of the New Zealand economy. Our recent phenomenal strength has helped fill the government coffers. New Zealand’s export driven growth and high interest rates has made the country attractive to short term investors and driven up the exchange rate.

But the slow down is upon us. I wonder how many city dwellers here in Auckland have noticed that with the exception of one month, every one of the last 14 months, New Zealand has earned less from our exports than we did for the same month in the previous year. While the impacts of this slow down will take up to eighteen months to flow on to the rest of the economy it is vital that the Government takes stock now. As much as government dreams of a miracle new economy based on the arts, film, eco-tourism, and a narrow form of biotechnology the reality is that for the foreseeable future New Zealand earning will overwhelmingly depend on farm business remaining strong, viable and market focussed.

For New Zealand farmers, broad stability in economic policy, a low inflation rate and sensible fiscal and monetary policies, remain the vital ingredients to give us the confidence to invest in our business. With the security of this framework it is then possible to focus firmly on the consumer. We need a coherent set of policies designed to enhance the long term growth potential of this country. We need policies that do not undermine our competitiveness and we certainly do not need government regulation based around the government’s view of what the market wants.

We need a business environment, which encourages New Zealanders to be innovative and enterprising, and rewards those who risk their capital to make profit. We need the protection of private property rights and confidence in the rule of law. We do not need the powers of Parliament to legislate away private property or to threaten landowners’ private and business security from uninvited visitors.

We need a regulatory framework that is cost effective and does not weigh down business under the regulatory burden of the RMA, health and safety and transport rules.

The reality is that in the current world market environment farmers are facing a cost price squeeze exacerbated by our Government’s actions.

The following lists just some of the costs imposed or proposed by government since the last election. There is the most topical government demand for farmers pay for research to reduce agricultural greenhouse gas emissions with no likelihood of world benefit. To add insult to injury this is after the government had commandeered the credits accruing to our land to use to benefit high energy users. There is the taxpayer funded Paid Parental Leave scheme which creates significant inequities for the self-employed and casual employees so typical of the farming sector. We have a proposed new set of storage and handling requirements on almost every substance used on farm. There is the recently introduced a Dog Control Bill which fails to recognise the reality of rural New Zealand and imposes, expensive, impractical and unworkable fencing requirements for dogs on farms. We have the recently passed the RMA Amendment Act which leaves every aspect of farm endeavour subject to controls under the expanded definitions of heritage. Access over private property is being reviewed so as to give greater opportunity for the general public whilst continuing to allow the Department of Conservation to limit access to the DoC estate. A new tax on all electricity consumers has been proposed in order to have electricity generation capacity lying idle for 59 years out of 60 years ACC costs have been raised so that a self-employed person on $50,000 per annum faced an 89 percent increase in levies over the past two years. Taxpayers' money is being used to subsidise government -friendly unions. Innovative taxes have been introduced such as the Sherry Tax to follow on from the “Fund Auckland Commuters” petrol tax whilst continuing to divert $670 million of fuel tax into general government coffers. The government announced and initiated a review of the land tenure process and only after eight months of ignoring letters and declining meeting requests finally agreed to discuss the process with those landowners who were directly affected. The government signed an Accord that affects all farmers but made no effort to involve farmers in that process. The government passed a Local Government Act that has substantially increased the cost of Local Government whilst steadfastly refusing to address the inequities of a long outdated rating regime.

I could continue with this list. On the other hand, I must acknowledge overdue moves by the government to address infrastructure failings. But I watch these moves with some trepidation. Infrastructure decisions do not seem to be based on sound or consistent economic principle.

Take telecommunications - the one infrastructure that could allow the compliance costs of many government and local government requirements to be reduced overnight. Here we see the supposed application of market principles for the delivery of a broadband service to schools but a refusal to guarantee access to a broadband service for the majority of farmers.

In electricity, where there is a market for electricity generation there is a move towards a government run commission yet no consideration given to maintaining a distribution system for rural New Zealand beyond 2013.

A piecemeal approach to roading and transport has seen the introduction of Bill’s promoting uneconomic modes of transport that are non-existent in most of rural New Zealand. We see taxpayer’s money being used to buy back a railway line, and to buy an airline in competition with the private sector. We have seen the introduction of new roading taxes whilst diverting petrol and road user charges into consolidated revenue.

As farmers we recognise the importance of government to provide a welfare safety net. But any government can only redistribute the wealth generated by its citizens and the productive private sector.

Where is there any evidence that this government recognises the wealth that farmers create for all New Zealanders?

Instead we face personalised attack on farmers by Ministers depicting them as whingers.

Farmers are proud environmental stewards. They are astute businesses people who are competing in a highly subsidised international marketplace. Daily, farmers face the challenge of managing a complex biological system both productively and sustainably. Farmers have every right to question simplistic “one size fits all” approaches to environmental sustainability that replicate existing legislation. Farmers have every right to question inequitable initiatives that require them to carry the full costs of protecting, heritage, indigenous biodiversity and landscape, which the general public wants but refuses to pay for. Farmers have every right to question the land access review which proposes to erode their private property rights and threatens their security. Farmers have every right to stand up and ask how many more new taxes they are going to be forced to pay for unaffordable dreams and schemes. Farmers are exercising their right to question polices which erode the nation’s wealth and the international competitiveness of the productive sector. Farmers are not asking for a handout to buy a black boat. We do not want our fellow tax payers to subsidise our novel and artistic ventures. Farmers just want stable and even handed government policy, we want investment in infrastructure from which all can benefit, we want, the ability to remain competitive, and a business environment that encourages diversity and innovation.

As someone whose family chose to cross the world to farm here I can confidently say I have joined the ranks of the doers not whingers. It is nearly twenty years since we have broken the shackles of subsidies but it is time the rest of the economy followed.

Ladies and gentlemen, farmers need strong representation of the rural voice as much as ever and as President of Federated Farmers I resolve to continue to make sure your voice is heard in the year ahead of us.

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