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Federated Farmers: Will we be heard in 2020?

Will we be heard in 2020?

This speech was delivered today by Charlie Pedersen, Vice President of Federated Farmers of New Zealand (Inc), to the Large Herds' Association Conference in Christchurch.

18 April 2005

Thank you for the kind introduction. It is a privilege to give the opening address to the 2005 Large Herds Conference. The theme of the 35th large herds' conference is Dairying Towards 2020. When I first sat down to prepare a speech to fit this theme, my immediate thought was 2020 – that's bloody ages away.

Surely I thought, most farmers, whatever the size of their herds, are looking no further out than five years into the future. As I said, that was my immediate reaction.

But then I cast my mind back 15 years – and it didn't seem that long ago. Somehow looking back 15 years is a lot easier to comprehend than the challenge of looking ahead a decade and a half. In 1990, as many of you will remember, New Zealand farming had been through some very rough times.

We had come through a painful restructuring process begun by the Labour government in 1984 which had removed subsidies and other taxpayer-funded perks. Although as dairy farmers we hadn’t really received Muldoon's supplementary minimum prices (SMPs) like our sheep farming mates, we had by default used the transport subsidies that were on the cartage of all fertiliser. Sheep farmers were in a tougher situation than dairy farmers and all forecasts for agriculture seemed bleak.

We had put up with years of crippling inflation and, as a consequence, very high interest rates which were forcing many farmers off the land. New Zealand also had a very unstable political and unenviable economic climate. Our economy was often referred to as a basket case.

The then Labour government was on its last legs – remember we had three different prime ministers in less than two months – and domestic demand was flat due to high unemployment and flat GDP growth. In 1990/91, the average dairy company payout was $2.42 a kilogram of milk solids. If you adjust that for inflation, that would equal a payout of $3.26 in today's terms -- which is not exactly a bumper season.

I can clearly remember what it was like to dairy farm in 1990. My wife Chrissy and I had done a dairy conversion with my twin brother and his wife in 1985, bought them out in 1987, and bought another farm as a runoff in 1988. We had been optimistic and borrowed all we could and more but the 26% interest rates we were paying and the nightly TV news articles of mortgagee sales of other farmers who had been optimistic took its toll. Chrissy looked after the farm and the kids during the day between milkings so I could go back to my old job of school teaching to get some extra cash into the farm accounts. All of you who were farming then will have similar tales to tell.

Political leaders of the time were referring to agriculture as a sunset industry and the markets and our bankers valued our farms accordingly. Interestingly we spent three years in a position of technical insolvency where the sale of our assets would not have repaid the bank. But we never failed to pay the mortgage interest on time. Chrissy clearly remembers a visit from the bank manager where he demanded we reduce our overdraft to the agreed $9,000. Chrissy was expecting our third child at the time and Brian the bank manager suggested we either sell some cows or the car. We did neither and Chrissy gave Brian peanut butter sandwiches for lunch. Happily, the business of farming is in a much sounder position today than in 1990 and a banker like Brian and his bank would get the short shift by most farmers.

New Zealand agriculture has adapted to the disruption caused by the removal of subsidies and crippling interest rates. The dairy industry has consolidated, and in doing so has become much more efficient, and market focussed. The old industry politics sideshow of the past has been condemned to history where it belongs.

The economy has been growing strongly for five years and we have had six years of relatively stable government which seems likely to continue. I believe that many of the reasons New Zealand has a strong economy, with growing asset values, can be traced to events 10 to 20 years ago. The point I wish to make is that the decisions being taken by government now are crucial to where the country will be in 2020. Today's strategic decisions are setting the political and economic framework that will exist in 2020.

The dairy industry is no different, so it is important that we hold conferences with themes like this one to examine where we are at the moment, where we are going, and how we will get there. Looking at the agenda, the economic side will be particularly well covered with speeches from representatives of a range of industry players.

Because of my position as Vice President of Federated Farmers, I perhaps have the latitude of being able to talk about a wider range of issues than some other speakers. Unlike others, I can talk about politics, so I will.

In a few months New Zealand will have a new government. Based on current polling, that government will in all probability look very similar to the one we have at the moment. No matter which parties have control of the Treasury benches, Federated Farmers of New Zealand and indeed all farmers, be they members or not, large herd owners or not, must continue to press for what is best for individual farmers and their families. We must demand that the ongoing prosperity of agriculture be a priority for the sake of the national economy and all New Zealanders. If we are successful, all New Zealanders can look forward to 2020 with optimism.

Federated Farmers has always worked with all political parties to achieve a better environment for the business of farming. The goals we seek are constantly changing in priority due to the mix of what legislation comes out of parliament, and how successful we have or have not been at achieving improvements.

But at this point in time there are clearly some issues of more importance than others. From a farming perspective, here are the 'top 10' areas (in no particular order) that any new government must understand are crucial to agriculture and by definition the wider economy. I invite you as influential farmers to lobby politicians to recognise and adopt these positions so that New Zealand farmers can continue to be competitive on the worlds markets.

1) Recognise success

New and existing MPs and their advisers must know and acknowledge the importance of agriculture to the New Zealand economy. Agriculture and first-stage downstream processing account for 17 percent of gross domestic product, and 55 percent of total exports. Agriculture is still the big bread winner in terms of foreign exchange. That contribution must be recognised by an increasingly urban-based electorate and the parties which pander to it, often to the detriment of the rural sector. All New Zealanders need to know that without farmers, their skill and efforts, that this country would be the largest third world nation in the South Pacific. It is farming that generates the wealth to purchase the consumer goods that our urban cousins increasingly desire.

2) Controlled access to farms

The current government wants to pass a law giving anybody, no matter their character or intent, the right to walk on private farmland along rivers, lakes and the seashore. Giving this right through legislation will increase the already-high risk of opportunistic crime that endangers the business of farming and farming families. No urban business would be expected to provide public access to the factory floor without strict controls. No other business would be forced to expose themselves or their production unit to opportunistic crimes. If the public are such a decent lot as the minister and the government keep telling us, and we as farmers have nothing to fear from them having access over our land, then why do supermarkets have surveillance cameras and security guards to protect themselves from their customers criminal activity? Are these not the same public that are to have 24 hour a day 365 days a year access to our farms under the government's proposal?

3) Protect property rights

Allowing free access over private land removes a property right from farmers. Unfortunately, that is just one example. Preservation of property rights is an absolute necessity for farmers, business, indeed anyone, to invest. If people think property can be taken off them, they will hold off investing in improvements. The obvious message is that the new government must protect property rights. It is secure property rights that helps mitigate investment risk. Without the investment of private businesspeople any economy is doomed to fail. Just look to the disasters of socialism in China and the old Soviet Republic and their subsequent growth if you doubt that for even one second.

4) Keep up trade push

The current government has done an excellent job in pushing the benefits of trade liberalisation negotiated through the World Trade Organisation and occasional bilateral deals.

That effort must continue. Unblocking the many restrictions to free trade would be a boon for the New Zealand economy, increasing the entire nation's prosperity. In 2020, we would hope that protected markets in Europe, the U.S. and Japan would have seen the benefits of removing trade distortions such as tariffs and quotas.

5) Less taxes

The government's tax take has increased dramatically over the past five years. Some of that is due to more money in the economy. But a lot is to do with people's incomes rising into higher tax brackets, higher petrol taxes, and new levies, fees, and charges. As a first step, a new government must seriously consider adopting a flatter tax structure, allowing the vast majority of hard working New Zealanders to keep more of their own money.

6) Less red tape

Regulation by central and local government has been growing at an alarming rate, swamping farmers with compliance costs. Since 1999 there have been 513 new laws and 1965 new regulations. Over 100 new acts and 403 new regulations came into being in 2004 alone.

7) Rating overhaul needed

Local government's dependence on property value rates is particularly hard on the farming community and indeed many people in cities too. Such a system means farming families pay a huge and inequitable contribution to local services. There must be a meaningful and independent review of local government funding, preferably by way of a Royal Commission of Inquiry. People use the services local government provides not the land, so why should land be taxed to provide the funding?

8) Education not regulation

What if the government passed a law saying everyone had to have a nice garden around their house? The law wouldn't work unless it is supported by funding to teach people how to garden. The same is true for the environment. The government can legislate to its heart's content in the interests of a better environment. But that won’t work. The government must instead invest in research to provide the tools and the knowledge to build up the new science that will enable us as farmers to achieve even better environmental outcomes.

9) Roading paid by users

All roads should be funded on the basis of who uses them, paid for by motorists through petrol taxes and road user charges. Such a system would be much fairer, especially to those who pay large rates bills, like farmers. It is important also that the government stop stealing from the road tax fund. Less than half of the tax collected for roads is spent on them and it is the legacy of that short-term thinking that has caused the roading problems we currently face.

Finally,

10) Fixing flaws in current legislation

The Department of Conservation (DoC) is given taxpayer money to look after public land.

It should not be mandated to use the Resource Management Act (RMA) and the Environment Court to dictate what private landowners can do with their land. DOC and the courts have forced some farmers to set aside large areas of private land for conservation, scenic views and heritage reasons. Farmers are forced to wear the costs without compensation. Government must fix these flaws in the RMA.

If Government agencies on behalf of the public want us as landowners to curtail certain activities in the interest of the public, that’s fine, but we must be compensated by the public for the reasonable costs of doing so. The idea of compensation was originally envisioned for the RMA but unsurprisingly was left out. The RMA must be amended to include compensation to landowners. Only compensation being required will ease the endless demands of others who bear none of the cost of what they want of the land we own.

So ladies and gentlemen there is the list of expectations we have of the next government. On behalf of all New Zealand farmers, Federated Farmers will work to bring these to the fore over the run up to this year's election. Please help us to do so by being members of your only lobby organisation. Also, please can I enlist your help as influential farmers to inform and influence all New Zealanders of the importance of what we do for the benefit of this nation.

Note: Speech was delivered at 10am, April 18.

ENDS

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