One + One = Three

By Edlin, Bob | New Zealand Management, May 2007 | Go to article overview

One + One = Three


Edlin, Bob, New Zealand Management


No, don't use the figures from Statistics New Zealand when measuring agriculture's contribution to GDP, your columnist was urged by the executive director of Meat and Wool New Zealand's Economic Service, Rob Davison. They are limited to measuring on-farm production. You should work out the value added to the milk, meat, wool and what-have-you beyond the farm gate.

The official statistics show agriculture contributes around five percent of the country's total GDP. Doing it Davison's way, the figure rises to 17 percent.

His argument in favour of the bigger number is simple: if you unplugged the on-farm bit of the agriculture sector from the economy, there would be no place for the stainless steel fabrication industry that builds plant for the dairy industry, or the dairy and meat processing factories (all counted as "manufacturing" in the official statistics). Nor would there be a fertiliser industry or top-dressing industry or transport operators to take stock to the processors and finished goods from the processors to the ports, or rural service companies like PGG Wrightson, farm accountants, farm lawyers, farm scientists ... And so on.

Davison is a staunch champion of the agricultural economy: as much of it as he can statistically embrace by using input and output numbers. He wants the value-added components recognised to demonstrate to the public--and to policy-makers--the reality that agriculture accounts for almost 20 percent of our economy.

He also likes to trumpet about the way agriculture has thrived since deregulation of the country's economy began with the Lange government's budget in November 1984. By 1986/87 most of the support to agriculture had gone with only some remnants left on a fast removal track.

In 1990/91 the total agricultural sector, including on-farm, the input supply sectors and the downstream processing, transport and marketing sectors, contributed 13.5 percent to GDP. From 1990/91 to 2004/05 GDP for the whole economy grew by 57 percent from $79.59 billion to $125.3 billion. From 1990/91 to 2002/03 total agriculture grew faster, contributing 17 percent of GDP.

Thus agriculture grew 98 percent in GDP terms while the rest of the economy grew 51 percent. In part, this production boost resulted from improvement in downstream processing.

There have been land use changes, too, from sheep and beef to higher-value dairy production on some land, plus significantly improved levels of animal productivity. How to measure the agricultural sector was tackled in a recent report from ABN AMRO Craigs on rural servicing company PGG Wrightson. …

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