Environmental decision-making not evidence based

December 11, 2008

An interesting admission from DOC’s BIM

66. Unlike economic and social policy, environmental decision-making in New Zealand is not well supported by a strong evidence base.

In particular, we lack the integrated environmental and economic information needed to systematically assess the effects of policy on resource efficiency, the environment, economic activity and productivity.

This makes it difficult to demonstrate New Zealand’s environmental sustainability at a national or sectoral level.

To support good decision-making, we need to strengthen the existing environmental-economic accounts and other related data, and build capability across government to use that information.

The evidence base should be a key component of the official statistics system, shared across government, and focused on the current and future priorities for New Zealand.

This would support farmers’ views that policies and decisions on pastoral leases including tenure review, land use and amenity values are based on emotion and politics rather than evidence.

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MAF BIM paints mixed picture

December 8, 2008

The Minsitry of Agriculture Briefing for Incoming Ministers  paints a mixed picture for agriculture.

The BIM is 48 pages long and I’m not going to analyse it all, just give some thoughts on some of the matters raised.

The good news, for those of who wonder if primary production still matters is MAF’s reminder of the importance of agriculture, food and forestry industries to the economy, employment and social wellbeing and that they generate 64% of our merchandise export earnings.

They are the only major industries in which we have sufficient scale, market share and supply chains to be truly competitive in international trade. New Zealand is the world’s largest dairy and sheep meat exporter, and has some of the world’s most competitive horticultural and forestry industries.

Over the next 20 years, New Zealand’s food and fibre producing capability will become increasingly important. Globally, rising population and economic growth is expected to increase demand for agricultural and forestry products. At the same time land and resources, such as freshwater, available for food and fibre production worldwide is likely to decline.

But:

Despite this favourable long-term outlook for New Zealand’s primary production sectors, our industries, environment and broader society face a complex set of challenges to reap future opportunities. These challenges are exacerbated by the current global financial crisis that continues to unfold with uncertain impacts and duration.

Among the challenges are an expected decrease in demand for our exports and difficulty getting credit and servicing debt.

Then there’s the importance of free trade:

For a small country lacking significant economic power, legally-binding multilateral trade and environmental management rules are important to achieve economic and environmental benefits not available by other means.

The importance of environmentally responsible practices was outlined:

The challenge is to develop integrated policies that provide incentives for the sectors to work towards a more sustainable balance in economic, environmental, social and cultural outcomes for the benefit of all New Zealanders. As resources become fully allocated and ecosystems reach the limits of what they can deal with, there are increasingly difficult decisions needing to be made that will impact on the practices of primary producers.

Water availability and quality are also pressing issues and improved water management – of both quality and quantity are an urgent priority.

In 2002/03, irrigation was estimated to contribute around $920 million net GDP “at the farm gate”, over and above that which would have been produced from the same land without irrigation. Since then, the area of irrigated agriculture and horticulture has increased by about 25 percent, from 480 000 hectares to around 600 000 hectares.

Theoretically there is a further 1.9 million hectares of land capable of being irrigated. However, most of the recent increase in irrigation is sourced from groundwater, which has generally reached or is quickly approaching allocation limits in most parts of the country. Further irrigation development, particularly on the eastern side of New Zealand as climate change impacts, will require water storage and distribution systems to deal with fluctuating water availability.

Currently only about four percent of all the freshwater that flows toward the sea is extracted. In Canterbury, where most irrigation occurs, just one percent of allocated water comes from storage infrastructure.

Storage is the best way to make use of water for irrigation with the least impact on river ecosystems because it takes the water at high flows, which generally is during the spring snow melt, or during and after heavy rains, and stores it to use when it’s dry.

But not everyone accepts this or wants it in their backyard so getting resouce consent is a long and expensive process.


Treasury BIM links economy to quality of life

December 4, 2008

A question from the floor at a public meeting in Wanaka three years ago asked then National Party leader Don Brash why he always talked about money and the economy rather than things that mattered like health and education.

He responded that a growing economy was the means to provide better social services.

This is echoed in Treasury’s Briefing to the Incoming Minister of Finance  :

Future gains to economic growth will need to be driven by increases in productivity growth. Improving productivity will have benefits for individuals, businesses and for society as a whole. A more productive New Zealand will offer our people opportunities to earn world-class incomes without having to go overseas to achieve this. It will allow New Zealand businesses to provide sophisticated products to the world without having to relocate their head offices. Higher incomes will underpin a public sector that can provide high-quality services, which will lead to improved social outcomes in crucial areas such as health and education.

Higher productivity will make New Zealand a more attractive place to live, work and do business with and from.

That reminds me of this quote from Margaret Thatcher:

No one would remember the Good Samaritan if he’d only had good intentions; he had money as well.

This is a simple concept but achieving the economic growth we need to provide the standard of living and social services we want is more complicated and we can’t leave it all to government.

They can implement policies which enable and encourage improved productivity but they can’t create wealth, thats up to people and businesses.


Ag commodities down but will lead 2009 rebound

December 4, 2008

The ANZ Commodities Price Index fell 7.2% in November, contributing to a 21% fall in four months.

Prices for dairy products fell 12% and have almost halved from their record levels a year ago. Prices for pelts tumbled 41%, the biggest decline among products tracked in the index. Beef, wool, lumber and aluminium all fell more than 10%. Seafood prices dropped for the first time in 18 months, sliding 0.6%. Lamb rose 4.3% and kiwifruit gained 0.3%.

Producers were cushioned from the slide in commodity prices by the weakening New Zealand dollar and the ANZ New Zealand Dollar Commodity Price Index was down only 1.8% in the latest month.

“Although the currency softened further in the month, it failed to match the drop in value of the commodities that we monitor,” ANZ economist Steve Edwards said in a statement. “It is clear that a weaker currency is acting as a buffer to falling commodity prices.”

Prices in yesterday’s on-line auction by Fonterra continued to slide with an average price of $4203.50 ($US2223) a tonne, 14% lower than last month’s auction and a fall of 49% since July.

Fonterra commercial director of GlobalTrade Guy Roper said the economic crisis had resulted in a significant drop in the demand for dairy commodities and a continued decline in prices had been expected.

“There will continue to be downward pressure on prices, until either the supply of product declines, or buyers have confidence that the global economic situation will improve,” Roper said.

Fonterra has been criticised for its auction which some feel is leading the market down. The Bull Pen disucsses that here.

However, the news isn’t all bad. Stock & Land  expects agricultural commodities to rebound next year.

After the dust settles from the sell off across commodities triggered by the global financial crisis, agricultural commodities will benefit from a secure demand outlook and tight supplies to outperform metals and oil in 2009.
Regardless of the gloomy macroeconomic outlook people still need to eat; therefore agricultural commodities will be more resilient during the economic downturn.

“Demand for agricultural commodities tends to be less elastic, less responsive to economic factors, more responsive to population,” said Lawrence Eagles, a commodities analyst at J.P. Morgan.

 

That’s encouraging because the MAF Briefing to Incoming Ministers warns the outlook is uncertain:

 

Over the next 20 years, New Zealand’s food and fibre producing capability will become increasingly important. Globally, rising population and economic growth is expected to increase demand for agricultural and forestry products. At the same time land and resources, such as freshwater, available for food and fibre production worldwide is likely to decline.

Despite this favourable long-term outlook for New Zealand’s primary production sectors, our industries, environment and broader society face a complex set of challenges to reap future opportunities. These challenges are exacerbated by the current global financial crisis that continues to unfold with uncertain impacts and duration.

Added to that is the growing threat of drought.

The contrast between irrigated and dryland in North Otago increases by the day, showing how badly we need rain and most of the east coast of both islands is similarly desperate for rain.

 


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