Guy Trafford reviews the Budget 2020 outcomes for the rural economy, comparing what was delivered to the expectations of the main rural lobby group

With the budget now announced it is perhaps worth looking back briefly and see what farming leaders were hoping would be included.

Andrew Hoggard Federated Farmers vice Chairman summed up what seemed reasonable wish list no doubt aware that demands for specific agricultural benefits would fall on death ears given the hammering other sectors have taken. It was heartening to ‘hear him’ taking a longer-term view, seeking help from government to enable farmers to set up for the future.

In the shorter term, he highlighted the inequity between rural and urban access to the communications networks and while some acknowledgement has occurred recently it is well short of what is going to be required. “That’s not just about fairness, it’s also giving our primary producers, our economic powerhouse, the modern tools they need to further lift productivity and be competitive as international traders.”

He also focused on the lack of recent investment over many years into the rural roading infrastructure. With the Hawkes Bay, Northland and many other parts of the country still suffering from a lack of feed due to drought, the opportunity to call for more water storage was also not missed. He said; “Rather than imposing new, heavy-handed environmental regulation the Budget should signal more funding for weed and pest control, environment enhancement projects and catchment groups and funding to help councils with their huge looming costs to address drinking water, waste water and stormwater problems.”

He also asked that the budget should set out a credible road map to sustainable fiscal policy.

Nothing too outrageous, and most in the ag community would agree with most if not all of Hoggard’s sentiments.

So how did the Budget go in meeting at least Hoggard’s wishes?

As was likely there was little direct spending targeting agriculture. However, other initiatives will have spin offs which will provide some benefit.

Starting with the connectivity issues. Prior to the budget, Shane Jones had already indicated that $15 million would be found to improve internet availability and quality to the rural sector. Nothing further was mentioned in the budget and if the spending is limited to $15 m then I fear I for one will still be harping on about this issue. With Spark preparing to roll out 5G starting from next year, the $15m-and -eemingly-nothing-more sticks in the craw for those who can barely get 3G.

Where there is hope is that ‘only’ $25 billion of the budget vote has currently been allocated and the remaining will come out as needs become more obvious.

Looking at the environment, the government has sent $1.1 bln into environmental projects. Many of which will positively impact upon the rural community.

The breakdown of that budget investment includes:

• $433 million for new jobs in regional environmental projects
• $315 million on biosecurity, including enhanced weed and pest control.
• $200 million for the Department of Conservation’s Jobs for Nature Fund
• $154 million for new jobs enhancing biodiversity on both public and private land

This fund should provide avenues which landowners can tap into to get some benefit to assist in conservation projects and weed and pest eradication.

Perhaps surprisingly little was said around water conservation. Surprising because the cities, especially Auckland and Wellington are both showing they having deficiencies in their water public water systems and a review of how the government looks at water storage is well overdue.

The Budget offers $500 mln for the primary sector, going largely to mycoplasma bovis recovery ($193 mln) and the Emissions Trading Scheme. MPI has received additional funding, however it is not to do more but to allow it to continue with what it is already doing in the face of increasing costs. The Budget summary of the Primary sectors vote is below:

Primary Industries ($443.7 million operating total and $42.5 million total capital) New Zealand’s primary industries play a critical role in growing our economy. As we move into the post-COVID-19 economic recovery, our primary sector is more important than ever. Budget 2020 invests in initiatives that will ensure our primary industries are supported and sustainable now and into the future. Funding will support our primary industries to continue their existing scope of operations, rebuild essential infrastructure and prevent or mitigate the impacts of biosecurity threats.

Key initiatives in this area include:

• Continuation of the Mycoplasma Bovis Eradication Programme ($193.5 million operating total). This initiative provides funding to support operational activities, including surveillance, tracking, movement controls and culling infected animals and also contributes to compensation costs for farmers, primarily associated with the loss of stock and milk production.

• Continuing the Ministry for Primary Industries’ (MPI’s) Current Scope of Operations ($126.1 million operating total). This initiative provides funding to address price pressures to ensure that MPI is able to deliver its wide scope of activities across agriculture, biosecurity, forestry, fisheries and food safety.

• Rebuilding Forestry Emissions Trading Scheme (ETS) Infrastructure to Meet Demand and Support the Transition to the Low Emissions Economy ($43.4 million operating total and $36.2 million total capital). This initiative provides funding to enable the implementation of new business processes for the Forestry ETS administration and implements the reforms set out in the Climate Change Response (Emissions Trading Reform) Bill. It will contribute to New Zealand’s broader efforts to decrease national emissions.

Under the heading of “Key Priorities” the primary sector gets a mention with:

Primary Industries – investing in initiatives that will ensure our primary industries are supported and sustainable now and into the future to support the economy and the environment.

One initiative pertaining to horticulture is the setting up of a fund to “Increasing Capability for Post-Entry Quarantine and Laboratory Services to Enable New Horticulture Markets”. Funding will be provided for greenhouse units providing secure containment for new imported plant varieties and breeding material that require testing for high-impact pests. This will enable the introduction of imported plant material for the horticulture sector to develop new and innovative high-value crops and cultivars. This requires a $6.3 capital spend over 10 years and an annual budget of $640k.

One area that smaller food processors may appreciate is a fund being set up to “alleviate increased pressure on the food safety system and address current issues owing to legislative, demographic and market drivers. It will enable the Ministry for Primary Industries (MPI) to deliver critical support to small, medium and rural-based food businesses; promote business participation and growth; address misalignment across critical food legislation; and investigate robust data requirements to inform regulations and set food and health standards.”

If this food safety initiative is even half successful many artisan food producers will breath a sigh of relief as meeting the MPI requirements are a major disincentive to setting up a food business. The spend here is $2.5 mln.

The Overseas Investment Office will also be receiving a financial boost of several million. Many will be hoping this will allow a more stringent approach to be applied to foreign owners when they seek to purchase New Zealand properties and also to follow up to make sure they are meeting the requirements agreed to.

So, will Andrew Hoggard be satisfied? Probably not, but I suspect agriculture has got no more or less than could be expected. 

Most of the benefits will come from what all New Zealanders can expect in health and education spending plus the most sectors have benefited from the wage and welfare supports. He could be excused for being disappointed in a lack of a strategic plan. However, with so much more water to flow under the bridge from the fall out from the pandemic effects the “spend and hope” approach that seems to have been the hall mark of this budget is not surprising.

The real tests will come in the spending of the money tucked away in the back pocket which no doubt will come out nearer the election.