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Anderton addresses Auckland Fed Farmers


19 May 2006 Speech

Anderton addresses Auckland provincial Federated Farmers AGM

The primary industries are the backbone of our economy. Between 70 and 95 percent of many of our primary goods are exported. Two thirds of our foreign exchange comes from primary sector industries.

That’s the foreign exchange we need to earn to pay for the goods and services we import. If we want to keep importing high value products, like cars, and iPods and oil, we need to generate higher and higher incomes.

The best way we can earn more for New Zealand is for our primary industries to earn more. They are the major part of our economy. Our meat and dairy sectors are the only industries in New Zealand that have truly global scale. The market capitalisation of our five largest meat and dairy cooperatives is greater than the entire NZ stock exchange.

It’s fashionable to think primary industries are declining in importance. But the facts tell a different story. Over the last fifteen years agriculture, forestry, and related industries have increased their productivity at more than double the rate of the rest of the economy. The contribution of agribusiness to New Zealand’s economy has been rising.

We need to celebrate the success of our primary industries. We want it to be a career choice young people are drawn to. We need our best and brightest talent to be attracted to these high-tech and highly skilled industries. As Associate Minister of Tertiary Education I am working to help plug the gaps in the labour market for our primary sectors.

We need to sustain the flow of skills and talent into the industry. We need to keep investing in science and innovation. Going back as far as the introduction of refrigerated shipping, we have always used technology to unlock potential on our land. Today we still depend on science and innovation.
The government and the industry have invested in primary sector science for decades. As a result, enormous scientific research and skill goes into producing high quality goods for discerning overseas markets. An apple or a lamb chop doesn’t look like a high tech good compared with a cell phone or computer. But there is just as much science in their production.

Our investment in innovation and science allow us to overcome our chief disadvantage - our distance from our markets. Science and skills will help us to stay ahead of the game as world markets change even faster. We’re facing rising competition from lower cost producers, and technical barriers to trade.

Competition in commodity goods is increasing from developing nations. Countries with rich resource bases such as Argentina, Chile, China, India and Brazil are already adding value. They’re moving up the supply chain to gain all the advantages they can. With low labour costs, limited environmental protections, cheap land and low exchange rates they can beat us on price nearly every time. New Zealand is no longer the lowest-cost milk producer in the world. In fact, we are no longer the lowest-cost producer of anything. It is not likely we will ever be able to get by on price alone.

So we can only continue to compete by moving up the value chain. We have come a long a way, but we will have to keep changing as the world changes even faster. Consumers' lifestyles are changing, and they’re demanding different products. We’ve already seen that - consumers don’t have the time to cook a roast dinner as often, or the large household to feed it to. Just as we adapted to that, we need to adapt to other changes. Consumers increasingly want products farmed in a way that cares for the future of our natural environment.

New trade barriers are being erected, for example, payments to farmers to “maintain the rural landscape”, as I discovered when I visited Europe earlier this year. I also found people talking about ‘Food miles’. This is a way of accounting for the carbon usage of shipping goods across the world. New Zealand products are already being singled out by this.

We have to demonstrate that our methods of production are climate friendly. If we don’t act overseas markets are increasingly likely to penalise New Zealand producers for weaknesses in these areas. But we can turn this threat to our advantage.

We have a good story to tell about our environment. But we need to ensure we have world leading practice to stay ahead of the challenges coming on this front. We are better placed than just about any nation on earth to give overseas consumers assurances that they are purchasing socially and environmentally responsible goods. We should celebrate and build on these advantages we have, and make a virtue of necessity. Farmers have an interest in the climate even more than consumers do. If we have more droughts and floods as a result of climate change, it will only get harder to grow crops, animals and forests.

New Zealand is competing against many countries, which have poor labour protections and low wage levels. There is no future in fighting for shelf space on price alone with these countries. We need to differentiate ourselves better.

We won’t get there by smashing into our primary sectors with regulation and punishment. The government has to work in partnership with the industry. We need solutions that enhance your businesses, not saddle you with greater compliance costs.

The primary sector, related industries and the government will have to work together. As Minister I am putting my hand up for this challenge. There will always be a place and a way for the sector to work with me. In a partnership you can expect straight talking from me. A partnership is give and take - no one gets their own way on everything. But we’ve had a lot of success with this approach. Numerous sectors and regions have worked with the government to get a new focus on the highest priorities for development. In many regions these were projects to extract higher value from primary industries - forestry in Rotorua, for example, food processing on the Hawkes Bay and seafood in Nelson.

We are all on the same team. We all want a prosperous and sustainable future for New Zealand. We are all reliant on our primary industries succeeding. Small percentage gains in the productivity and profitability of the sector, repeated year after year, turn into a high standard of living across the board. We need to unleash our potential. We need to keep moving to new, higher-value markets and protect the valuable markets in which we have gained a foothold.

This is a crucial sector for New Zealand. We can lift New Zealand's economic prosperity fastest by lifting our performance in the primary industries. I'm committed to working in partnership with the sector to overcome the barriers to faster growth. We have a lot of work to do. And I'm looking forward to getting started with you from today.

ENDS

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