The New Zealand Institute of Economic Research (NZIER) report, commissioned by the Dairy Companies Association of New Zealand, showed the industry contributed $7.8billion to New Zealand’s GDP and was the country’s largest goods exporter.
The sector has had tough seasons but in the year to March 2016 earned more than $13billion in exports in the year to March 2016, Mr Guy said.
The industry was especially important in regional areas, accounting for 14.8% of Southland’s economy, 11.5% of the West Coast economy and 10.9% of the Waikato economy.The report also highlighted the potential of further trade liberalisation. NZIER’s modelling suggested if all global dairy tariffs were eliminated, that would result in a $1billion boost to GDP.
That was why opening up market access and tackling non-tariff barriers as well remained a priority, he said.
Federated Farmers dairy chairman Andrew Hoggard said the industry had been subject to scrutiny during the recent downturn in terms of its resilience and future sustainability, but the report should "set the record straight and dispel the doom-and-gloom merchants".
"Unfortunately, there remains negative perceptions about our industry and yet we employ over 40,000 workers [and] support regional economic development and growth.
"There’s a lot of jobs in these rural areas which wouldn’t exist if it weren’t for dairy. What perhaps people don’t realise is the flow-on effects go past the farm gate, generating millions of dollars for local economies."
One particular satisfying outcome was the industry’s increasing awareness and action around environmental obligations, which was being achieved alongside more industry profitability, he said.
DairyNZ estimated farmers had spent more than $1billion over the past five years on environmental management systems such as effluent systems, riparian planting and retiring sensitive land, which equated to about $90,000 per dairy farm.
The report confirmed the dairy industry was resilient and capable of meeting future challenges around economic volatility and environmental sustainability.
It also predicted increasing demand globally for dairy products and the potential for emerging markets which would enable New Zealand’s dairy industry to maintain its competitiveness, he said.
Despite the price downturn in recent years, dairy remained New Zealand’s largest goods export sector.
In the past 26 years dairy export values grew by an average of 7.2% per year. Aside from wine (18.9% annual growth), only wood and wood products had faster average export growth (7.3%).
Ongoing dairy export growth would be essential if the Government was to meet its "export double" target of lifting real export values to $64billion by 2025, the report said.
As well as its direct impacts on export growth, employment and income generation, the dairy sector also played an important role in supporting activity in other parts of the economy.Farmers spent $711million on fertilisers and agrichemicals, $393million on forage crops and bought more than $190million worth of agricultural equipment last year.
They also spent a huge amount on services to support their operations; $914million on agricultural services, $432million on financial services and $197million on accounting and tax services.
Despite the recent cyclical price downturn, the medium-term outlook for global demand for dairy products remained very positive for New Zealand, it said.
New Zealand exports were expected to become more competitive in global dairy markets as the US dollar and euro currencies appreciated on the back of strengthening economic growth.
Per capita consumption of dairy exports was expected to grow most rapidly in Asia, as dietary requirements in emerging Asian economies such as China and Indonesia shifted towards protein-based products. Solid growth was also expected across Europe, Latin America and the Caribbean and North Africa.
There were numerous trade expansion opportunities for the New Zealand dairy sector as punitive tariffs were in place in many markets.
In the current global trading system, the tide of protectionism was rising. There was an increasing risk that tariffs could be increased rather than reduced. In that environment, just maintaining the status quo in terms of agricultural market access was likely to be a good outcome for New Zealand. Even if there was no additional market access for New Zealand exporters through multilateral or bilateral trade agreements in the short-term, just resisting a backslide where tariffs started to rise was important.
Dairy Companies Association of New Zealand chairman Malcolm Bailey said removing trade barriers would ultimately allow New Zealand’s dairy sector to maintain and build both sustainability and value-adding momentum.
At a glance
• Dairy contributes $7.8billion (3.5%) to New Zealand’s total GDP comprising dairy farming ($5.96billion) and dairy processing ($1.88billion).
• Accounts for 14.8% of Southland’s economy, 11.5% of the West Coast, 10.9% of the Waikato, 8% of Taranaki and 6% of Northland. New Zealand’s largest goods export sector at $13.6billion in the year to March 2016.
• Exports twice as much as the meat sector, almost four times as much as the wood and wood products sector and nine times as much as the wine sector.
• Employs more than 40,000 workers, with dairy employment growing more than twice as fast as total jobs, at an average of 3.7% per year since 2000.
• Provides more than one in five jobs in three territorial authority economies (Waimate, Otorohanga and Southland) and more than one in 10 in a further eight, including Clutha.
• Delivered $2.4billion in wages to farmers and processing workers in 2016.
