Politics / Country

Waterway clean up won't harm economy, NZIER says

12:11 pm on 17 September 2019

The government's proposed clean up of waterways will not harm New Zealand's overall economy, a report by the New Zealand Institute of Economic Research (NZIER) has suggested.

Photo: RNZ / Rebekah Parsons-King

That was because the dairy industry was smaller than was commonly supposed, averaging just 3.9 percent of the New Zealand economy over two and a half decades.

But the report admitted some regions might suffer economic hardship more than others.

The research was commissioned from NZIER by three environmental bodies, Forest & Bird, Greenpeace, and Fish and Game.

It followed this month's launch of the Action Plan for Healthy Waterways by the government.

That plan aimed to improve the ecological health of wetlands and streams via a range of measures.

These included setting higher standards of water quality in popular swimming spots, putting interim controls on land intensification, launching accelerated planning processes and other measures.

The announcement spurred strong complaints from some farmers that agricultural production could be made untenable in some regions.

But the NZIER report said this would not translate into overall economic harm for the nation.

"The likely impact on national GDP, due to the relatively small size of the dairy industry, is unlikely to be major at the national level," the report said.

"A reduction in GDP from (less) intensive dairy would, however, have uneven local effects, given the regional distribution of the sector."

The NZIER report then went on to say that more knowledge was needed to determine the real impact of the government's plan.

"The government has come to the view, which is well supported by scientific evidence, that water quality has deteriorated due to human activities," the report said.

"Its view is that the benefits of improving water quality are greater than the costs. However, we are not aware of any economic modelling that has been done at a national scale that confirms this presumption.

"The government should commission further, detailed and independent analysis of the effects of its proposals, outlining the benefits and costs at all levels."

But the report also said land users such as farmers did not always meet the costs of their own activities, and this was being addressed by the government's plan.

"What is being proposed is essentially that some of the costs of production that are currently not a financial charge to farms - water pollution and freshwater habitat loss or 'externalities' in the jargon of economics - will in the future be borne directly by farmers."

The report said if nothing else changed, it would imply that farm profitability must fall.

But things would change, due to creativity and innovation which has helped the farming industry in the past and could do so again.

It added a long lead time to bring in these reforms would also help.

Report paints inaccurate picture - DairyNZ

DairyNZ said the report trivialised the role the dairy sector played in New Zealand's economy and ignored details of the government's freshwater package.

Chief executive Tim Mackle said NZIER's publication was less an economic report than a high-level commentary, and painted an inaccurate picture.

He said it trivialised dairy's role in the economy, with 28 percent of merchandise exports and one-fifth of goods and services exports coming from the dairy sector.

"The NZIER report does not analyse the economic benefits of dairy to regional communities - which is a critical aspect of dairy farming's contribution to NZ Inc.

"Dairying is the engine of the regions, in terms of income and jobs, and is the top income earner in Waikato, West Coast and Southland."

Dr Mackle quoted a report from Local Government New Zealand which found the water plan would potentially impose very large costs on agriculture.

"In that report, it referred to a Waikato modelling study which found that land-use change was required to achieve the nitrogen and phosphorus limits proposed - with changes resulting in a dairy revenue loss of $140m per year."

The report also ignored work already done by farmers such fencing off waterways.