New Zealand’s food and fibre sector must earn more from its exports as an ageing population places increased strain on its public services and living standards, a new discussion paper says.
The paper, from the New Zealand Institute of Economic Research (NZIER) and the Helen Clark Foundation, says that affording public services – education, healthcare and superannuation – will be a “central challenge” for NZ.
The sector, including agriculture, horticulture, forestry, fishing and associated processing, accounts for 80% of NZ’s goods exports and is one of the main sources of income and other tax revenues.
Foundation chair Peter Davis said NZ clearly needs to earn more as a country in the decades ahead.
“We need to ensure we’re doing everything we can as a country to support the sector to grow its productivity and earn more from exports without putting more pressure on our people or our environment.
“The good news is that our paper finds clear pathways NZ can take to achieve this.”
Those pathways include developing a more skilled workforce; consumer-driven marketing and product development; better investment, especially in processing; improving management and governance; and strategic collaboration to create scale and larger investment pools.
The paper, Pathways to Prosperity: Capturing more of the value of our food and fibre sector exports for New Zealand, includes interviews with primary sector leaders who identify the processing sector as an area where productivity can be improved.
Lifting export earnings means pushing more into the added-value export space and finding ways to get more money from the products farmers produce without damaging the environment.
“That’s what value add is about.
“It’s about figuring out how to get more money for the stuff that we already do, how to add value, how to meet consumer demands overseas and bring more value back to NZ,” paper co-author, NZIER principal economist Bill Kaye-Blakesaid.
However, making those improvements is not easy.
“New Zealand is small, a lot of our companies are small, but to do this successfully, you have to develop all of the skills of a multinational company but with far fewer people and less money.”
More training to improve soft skills is key and so too is investment.
“We just don’t invest enough in New Zealand. There is a lot of risk aversion, people aren’t keen to invest and they’re not willing to take risks, so we need to improve that.”
One way to achieve that is de-risking investment through public money. This is where central government could play a role because it costs less for a government to borrow money than it does a private company.
As well as helping with investment, the government could assist with coordination and collaboration.
“One of the things that industry pointed out is that overseas they had greater collaboration inside industries. They find ways to collaborate and that might be through software systems or through overseas marketing.”
It could also help with training and education. While the Ministry for Primary Industries is doing a lot in that space, more is required around technical and soft skills, Kaye-Blake said.
Taking more risks also means being more comfortable with failure. He suggested the creation of a commercial research centre by central government that can study these failures so other businesses can learn from them.
While there are very good examples of management in NZ, on the whole the country is not that good and improvements as managers is an area where it could do better.
Inter-industry collaboration by using shared resources to generate scale could also boost productivity, he said.
New and emerging technology could also play a role in increasing productivity.
He acknowledged that farmers are under pressure with increased costs and labour issues and he hopes the paper pushes farmers to look at new ways to do things to get those productivity lifts rather than waiting until it has reached crisis point before making a change.
Kaye-Blake said that “time and patient money – that is, investment and policies that do not demand immediate results” could enable the sector to overcome these disadvantages.
“Improving productivity will be hard but maintaining the status quo will leave us with a middling economic performance and increasing anxiety about how New Zealand will pay its way in the future.”
