It is my pleasure to be here today to open Meat New Zealand’s Annual General Meeting. I would like to convey to you
first of all the greetings of the Prime Minister who was unable to be here due to her visit to the United States, where
she is meeting President George Bush and members of his administration to discuss trade, among other matters.
Your theme for this year’s Annual General Meeting is “Enhancing New Zealand’s Natural Advantage”. I believe this
accurately reflects the general position of the agricultural sector in New Zealand. It is a sector that enjoys great
natural advantages; but the challenge is to find innovative ways to add more value to what nature has provided to us.
Confidence in the primary production sector is at an all-time high, and for good reasons. Climatic conditions, the
cyclical movement of prices and the low dollar are combining in an extraordinary way to deliver excellent earnings to
farmers and others in the industry. As a result, the contribution of agriculture in general to gross domestic product
last calendar year is estimated at 16.5 percent.
This result is very heartening. However, the question we must continue to ask ourselves is: how can we sustain this good
performance over time, when all of these key variables are, as one would expect, variable?
The answer, put simply, is science; but science in two forms:
- first, what we might call the “rocket science” of the meat industry, that is, technological know-how and its
application through innovation in production, processing and marketing; and
- second, “science” of a more political kind, in the form of stable economic policies and determined and intelligent
action by government to take an active role in fostering growth and clearing away obstacles.
I mentioned climate, prices and exchange rates as the key variables in farming; but surely a fourth variable has to be
brought into the picture: the application of technology to every aspect of production, processing and marketing.
Agriculture is already a dynamic sector, at the leading edge of innovation and technology adoption. It is disheartening
to find that New Zealanders in general still have a fairly prosaic view of the meat industry, as one in which the
essential skills are a strong back, an aptitude with farm machinery, and the ability to wield a sharp knife. This view
is long out of date.
When we talk about a knowledge-driven society or the knowledge economy, agriculture should spring readily to mind. Over
the past 15 years or so, since farm subsidies and price supports were abolished, the average annual gain in productivity
in agriculture has been 3.9 per cent. For our economy as a whole, it was only 1.1 per cent. Much of this gain, year on
year, has been due to the adoption of new technologies.
What these figures do not show, however, is that there are two components to the application of new technology to
agriculture. First, we can use it to increase yields and produce greater volumes per farming unit. Important as this is,
it is still about producing a commodity - more of it, more cheaply, and hence with greater margins, but a commodity
nevertheless. The second application of technology - and one that still has great untapped potential - is the kind of
innovation that turns a commodity into a niche product which can command a premium on world markets.
The government has recognised the importance of fostering innovation in all its forms throughout the economy, and
importantly has recognised that this involves a partnership between government and business. Innovation does not happen
because of government assistance; nevertheless, without government involvement opportunities to innovate and to gain the
benefits of innovation are often lost.
Our innovation strategy highlights three areas where New Zealand has proven capability and where there are opportunities
to overcome our natural disadvantages of distance from major world populations and a small domestic market. These are:
information and communications technology; biotechnology; and creative industries. It is important to note that we are
not viewing these as industry silos, but as capabilities that have a broad application across the economy.
Thus, while biotechnology has an obvious affinity with the meat industry, the strategy invites consideration of how
innovative use of communications technology could enhance returns for the meat industry. And while it is perhaps
stretching the imagination to find synergies between the meat industry and the Lord of the Rings Trilogy, there are
clearly very high returns to those who capture the imagination of the food industry worldwide. It is well said amongst
marketers that, at the end of the day, protein is best viewed for marketing purposes as a form of entertainment.
The innovation strategy is more than a glossy report. Shortly, my colleague, the Hon Pete Hodgson will be releasing
information on the nuts and bolts mechanisms for forming and funding partnerships between business and government. I
trust many people in the meat industry will get involved.
Fostering innovation - harnessing the particular “rocket science” associated with the meat industry - is one important
goal for the long term. I want to focus on two other goals which fall more into the purview of “political” science.
The first is simply the maintenance of sound economic management, in the form of clear monetary and fiscal policy. The
latest financial indicators reveal a very positive outlook for the New Zealand economy, from the short to the long term.
Our economy is growing steadily, with low inflation, rising employment, moderate unemployment, and a current account
deficit that is very low by recent standards. Real wages and share prices have both risen. Government spending is at
prudent levels, with healthy fiscal surpluses, and manageable public debt. All of this despite the events of September
11 last year, and all that those events have meant for confidence in the world economy.
I am not going to attribute this success to the current government’s policies - not entirely, at any rate. However, good
economic management has played a role. For example:
- We re-negotiated the Policy Targets Agreement with the Governor of the Reserve Bank to require the Bank to be more
sensitive to the impacts of its monetary management on output in the real economy in the immediate term;
- We are running a tight fiscal policy in which the government has raised all the extra money required to cover its
extra spending on social and economic development programmes;
- We have undertaken a wide range of smaller initiatives, dealing with skill shortages, upgrading the regulatory
environment that applies to the electricity and telecommunications sectors, supporting the development of e-commerce,
improving the funding of research and development, and simplifying the tax treatment of private sector R
The second set of political actions involves clearing away obstacles to growth, in particular obstacles that have to do
with institutional structures and intractable problems of governance. Clearly the major example of this in agriculture
has been the completion of the deregulation programme. Although an interesting variation on that theme - a variation
which illustrates the basically pragmatic and non-ideological approach of the government - has been the consolidation of
the dairy industry.
Another important example, however, is the government’s recent $227 million land transport package. An important part of
the impetus for this package has been the need to ensure - literally - a smoother road for our exporters to move goods
to market. From the fund, $30 million has been earmarked for regional development - the first time land transport
funding has been specifically dedicated to regional development.
It is also true that a large portion of the package is aimed at reducing traffic congestion in Auckland, which has long
been a Gordian Knot, both politically and literally. This is not intended as merely a gift to Auckland commuters. That
city’s transport woes are estimated to cost the country around $1 billion a year. A portion of that cost relates to lost
productivity as goods moving to market have to pass through the clogged transport arteries of our major urban area and
one of our major ports.
In this instance, it is clear that what is good for Auckland is good for the rest of the country.
The government is in no way overlooking the importance of agriculture in general - and the meat industry in particular -
in New Zealand’s economic future. Recent governments have tended to view the primary sector as something of a sunset
industry; an industry, they might say, with a great future behind it.
In my view, a diverse agricultural base, in combination with a community of innovators with the capacity to shape new
products for new markets, and in partnership with a government that believes in intervening in an intelligent way in the
economy, will become if anything more vital as a cornerstone of our future prosperity.
It is important that we work together - government focusing on what it best can do; the industry focusing on its core
tasks - to secure the potential that we all know to be within our grasp.
Thank you.