Venu Menon
Wellington, June 15,2024
Inflation, tight monetary policy, and rising geopolitical tensions have slowed global economic growth over the past two years.
Despite a challenging global landscape, New Zealand’s export economy has been resilient on the back of export revenue from the horticulture and seafood sectors, which is set to grow in 2023/24, thanks to better weather, availability of labour for harvests and, in the case of seafood in particular, robust demand, as per forecasts by the latest Situation and Outlook for Primary Industries (SOPI) published this week by the Ministry for Primary Industries.
But falling global demand has adversely impacted dairy, meat and wool, and forestry sectors. Revenue in these sectors has dipped also due to higher global supplies dampening dairy and meat prices.
Forestry revenue has been hit by disruptions in the domestic supply of processed wood products, though sectors ravaged by Cyclone Gabrielle have been recovering steadily through 2023/24.
But the success story is the food and fibre sector. Export revenue in this sector is tipped to reach $54.6 billion this year and hit a record $66.6 billion in 2028.
Agriculture Minister Todd McClay, while applauding farmers, growers, processors, fishers, and foresters, foresees the food and fibre sector will be pivotal in achieving the coalition Government’s “aspirational goal of becoming an exporting powerhouse by doubling the value of our exports in 10 years.”
The minister referenced the negotiations under way on a Comprehensive Economic Partnership Agreement with the United Arab Emirates (UAE) “to open up new commercial opportunities for our exporters.”
Oceans and Fisheries Minister Shane Jones has stressed the need to reduce bureaucratic red tape in line with the expectations of overseas and domestic consumers.
It is worth noting the government has recently introduced the Resource Management (Extended duration of Coastal Permits for Marine Farms) Amendment Bill, which aims to extend current resource consents for marine farms by up to 20 years.
Jones expects the legislation will remove “a significant burden on the aquaculture industry and provide certainty for the future of marine farms.”
Seafood export revenue is expected to increase by 5% to reach $2.2 billion in the year to 30 June 2024, SOPI data shows.
Overall, export revenue from dairy, meat, forestry, horticulture, seafood, and processed food and other product sectors is forecast to drive the economy.
Revenue levels in the arable sector will continue to hold steady.
But geopolitical tensions and prolonged inflation continue to dog global trade in 2024/25, made worse by disruptions in two of the world’s main shipping routes.
SOPI data forecast domestic farm input costs will remain high in 2024/25, lowering profit margins for producers. Migrant workers will ensure a steady supply of labour.
Free trade agreements, current and prospective, are aiding exporters through increased quotas and lower tariffs.
The longterm forecast is that growing demand and tight supply may lead to better prices. Emerging economies will play a major role in global demand growth, though extreme weather events, policy uncertainty, demographic shifts and squeezed profits are likely to constrain global supply.
Venu Menon is an Indian Newslink reporter based in Wellington
