Meanwhile in other news

12/05/2016

While the Panama papers and examining the entrails of The Bachelor are getting headlines the government books are in a healthier state than forecast:

The $167 million operating balance before gains and losses (OBEGAL) surplus for the nine months to 31 March was $334 million better than forecast, Finance Minister Bill English says.

Core Crown revenue was $206 million higher than forecast, largely due to core Crown tax revenue being $702 million higher than forecast by the Treasury in December.

These aren’t big numbers in relation to the government’s total finances. But given the global financial position and the impact of low dairy prices, this is an achievement.

This was partially offset by core Crown interest and dividend revenue being $456 million lower than forecast.

Mr English says because of sustained, moderate growth in the economy, the Crown accounts are in good order ahead of the delivery of Budget 2016 later this month.

“We’ve been successful in turning an $18.4 billion deficit in 2011 to a surplus last year. In Budget 2016 our focus is shifting more to repaying debt.

“Budget 2016 will reflect this Government’s continued commitment to responsible fiscal management. At the same time it will build on the good progress we’ve made over the previous seven Budgets, with further investment in a growing economy and public services.

“We measure success by results, rather than the level of spending.”

It’s not what they’re spending but the impact that spending that matters.

One area that always takes a lot of spending is welfare.

The government is taking the investment approach which means spending more in the short term for longer term social and financial gain.

A report from Deloitte and NZIER says that the investment approach needs to become a mainstream way of working across more of the social sector.

State of the State New Zealand 2016: Social investment for our future advocates broadening the use of the social investment approach to manage New Zealand’s future fiscal challenges and support better outcomes for Kiwis.

NZIER Deputy Chief Executive John Ballingall says the State of the State takes a close look at government finances and the burdens New Zealanders could face in the future.

“A combination of our ageing population, low productivity and revenue growth, and the need to reduce government debt will impose huge fiscal pressures in coming decades – particularly in social spending. More importantly, too many people in New Zealand are experiencing poor life outcomes and too many of their children are at risk of following them,” says Mr Ballingall.

Deloitte partner and public sector leader Dave Farrelly says it’s the sum of these factors which drove us to focus the report on social investment, an approach to funding social services focusing on root causes to prevent the need for these services in the future.

“For example, with social investment the task is not to deliver the next 100 prison beds for the same cost as the previous 50. It’s to remove the need for those new prison beds altogether,” says Mr Farrelly.

“Today social investment is like a start-up – a small number of people are working incredibly hard to bring a big bold vision to life. Tomorrow, social investment needs to become a mainstream way of working,” he says.

In the six months of research for the report, Deloitte and NZIER spoke to some of the most senior and influential leaders in the public, non-government and private sectors – all of whom provided a unique perspective on social investment.

State of the State proposes a package of bold reforms to realise the aspiration for social investment in New Zealand. The recommendations are:

1. Release, every four years, a government-wide statement to define the outcomes and targets for at-risk New Zealanders
2. Establish a new agency to commission specialist social services for people at risk of poor life outcomes
3. Embed the social investment approach to funding quality and sustainability in the new agency’s operating model
4. Enable better access to government-held data and detailed evaluation reports

“We suggest a structural reconfiguration that some will find challenging, while acknowledging we don’t yet have all the answers,” says Mr Farrelly.

“But we must be bold in tackling these challenges today to maintain our way of life in the future,” he concludes.

Social investment is working and the reforms Social Development Minister Anne Tolley is promoting will do more.

Trans Tasman notes:

. . . The reform being pushed through by Tolley is perhaps the most far-reaching undertaken by the Govt and could stand as its greatest legacy if it achieves its goals. Already it has made some headway in improving the lives of Maori children who are more than twice as likely as Pakeha children to grow up in households experiencing hardship, and fare worse in most indicators. A report by the University of Otago-based Child and Youth Epidemiology Service shows increasing numbers of Maori pre schoolers are getting early childhood education. There’s also been a halving of school suspensions for Maori students, an increase in immunisation rates, fewer young Maori smoking,and falling hospitalisation rates for Maori children for injuries from assault, neglect or maltreatment. Tolley is understood to have secured an additional funding, probably of the order of $500m in this year’s budget for the reform. . . 

Turning around benefit dependency and all the financial and social costs that go with it will not be neither easy nor cheap but the investment approach is working and it’s a much better story than many of the others which are getting attention at the moment.

 


Dairying doing it for NZ

09/12/2010

It’s easy to see the positive social and economic impact dairying makes in North Otago, there is now proof of how the wealth generated from milk benefits the whole country.

An independent report by the New Zealand Institute of Economic Research, released today, shows money from milk flows right through the economy, starting at the farm gate and moving out to rural and urban communities.

The report to Fonterra and DairyNZ shows:-

  • Dairy provides 26% of New Zealand’s exports.
  • A $1 rise in Fonterra’s payout makes every New Zealander nearly $300 better off.
  • Dairy farmers spent around 50c in every dollar they received on locally produced goods and services.
  • Every tonne of dairy exports helps reduce the current account deficit, bringing down interest rates and reducing mortgage payments for homeowners.
  • Dairying employs 35,000 workers directly and a further 10,000 contractors.

Fonterra CEO Andrew Ferrier said today the report, commissioned by Fonterra and DairyNZ, will enable New Zealanders to better understand that when dairy does well, New Zealand does well.

“Most people understand dairy is a key export industry. Now they can understand what it means for them as the report accurately quantifies, for the first time, the tangible benefits to both rural and urban communities,” said Mr Ferrier.

An increase of $1 to Fonterra’s payout boost real incomes by about $270 for every person in New Zealand, showing everyone benefits when the company does well.

“Of the $7.5 billion farmers received in 2009, $3.6 billion was spent on domestically produced goods, including fertiliser, feed, agricultural services and financial services.

“There is no doubt that dairy has helped us out of the recession and the benefits extend well beyond the farm gate.  Export growth from the dairy sector has helped narrow the current account deficit and that helps everyone through lower interest rates on mortgages and other borrowings.”

NZIER Deputy Chief Executive, John Ballingall, said: “Our modelling shows that the dairy sector has delivered significant and ongoing benefits to the New Zealand economy.”

“Its influence extends well beyond its direct impacts in dairying areas, with the sector closely intertwined with the rest of the economy. That includes the jobs it delivers, the income that these workers earn, its links to supply firms, the effects of rural economic growth on urban centres and the tax revenue it provides to fund public services.

“The sector’s strength has been very evident as New Zealand recovers from the global financial crisis and domestic recession. Given anaemic domestic demand, the export side of the economy has been relied on to generate economic growth and dairy has made a significant contribution.”

DairyNZ Chief Executive, Dr Tim Mackle, said that last year dairying kept 35,000 people directly in work. “Our contribution to jobs is like having a city the size of Gisborne all working in the dairy industry. Urban centres also get a healthy share of indirect employment as they provide essential goods and services that are needed to produce dairy products.”

Dr Mackle said the NZIER report shows dairy accounts for 26 per cent of New Zealand’s total exports and it is looking to grow its contribution to the country.

“We’ve got a good track record of supporting regional growth, which this report shows, and we want to continue this trend. The challenge for our industry will be in how we achieve this growth in a sustainable way,” said Dr Mackle.

Highlights of  dairying’s contribution to the regions, based on 2009 figures,  include:

Waikato

  • Regional dairy production was worth $2.4 billion in 2009 (Matamata-Piako $552m, Waikato district $390m, Waipa $361, South Waikato $263m, Hauraki $196m)
  • More than 8,000 employed in local dairy industry

Bay of Plenty 

  • Regional dairy production was worth $605 million in 2009
  • Dairy revenue of $254m in Rotorua district
  • Bay of Plenty employs more than 3,200 directly in the dairy industry

Taranaki 

  • Regional dairy production was worth $822 million in 2009
  • Taranaki employs almost 3,900 directly in the dairy industry
  • 26 per cent employed in South Taranaki district by dairy industry, nearly 9 per cent of total dairy related employment in New Zealand

Manawatu-Wanganui/King Country

  • Dairy production in Otorohanga was $234m in 2009 and Tararua $188m
  • These regions employ more than 3,200 directly in the dairy industry

Canterbury

  • Regional dairy production was worth nearly $1 billion in 2009 (Ashburton $471m, Selwyn $270m, Timaru $185m)
  • Canterbury employs nearly 3,500 directly in the dairy industry

Otago/Southland

  • Regional dairy production was worth nearly $900m in 2009 (Southland $710m, Clutha $182m)
  • Otago/Southland employs more than 4,200 directly in the dairy industry.

The full report is here.


Dairy subsidies to cost NZ $122m

27/06/2009

Federated Farmers president Don Nicolson got a lot of attention for his piece in the Wall Street Journal on milking trade subsidies.

Perhaps he should follow that up with an invoice because the New Zealand Institute of Economic Research has calculated that the subsidies on dairy products introduced by the EU and USA will cost the New Zealand economy $122 million.

New Zealand’s dairy output may fall by around 5% and the value of milk, butter and cheese exports could decline some 8% as American and European subsidies create an oversupply of product, according to the NZIER’s latest Insight newsletter. The think-tank predicts the global economy will be worse off by around US$41 million, although countries such as Japan and Korean would benefit from lower world prices.

The prospect of lower dairy prices “will cause kiwi farmers’ incomes to fall below where they would otherwise have been, through no fault of their own,” said the institute’s deputy chief executive John Ballingall. “The risk of ongoing retaliation between the U.S. and EU, and potentially others, could lead to larger increases in subsidies, tariffs and other trade barriers over time.”

The immediate impact of the subsidies was partially responsible for the decrease in Fonterra’s forecast payout for the new season.

The threat of ongoing retaliation, bigger subsidies, tariffs and other trade barriers is even more concerning. It will hinder the recovery and hamper progress towards freer trade.

The NZIER Dairy Insight newsletter is here.


Food miles fallacy foiled by facts

25/02/2009

The food miles campaign is thought to be one reason for a 15% fall in New Zealand lamb sales in Britain.

For four years now some UK shops, like Tesco, have been promoting the food miles concept, meaning the closer to home something is produced the more sustainable it is. Now, the New Zealand Institute of Economic Research says it can prove that theory wrong. 

“Our cattle are grazed on grass rather than grain, and they’re housed outside most of the year rather than being in heated sheds,” says John Ballingall, “so the energy used in producing New Zealand food is often lower than the UK.”

In fact, the research shows that an average trip by car to the supermarket in Britain, 6.4km, to buy the weekly groceries uses the same amount of energy as shipping that food 8500km.

That’s a very impressive statistic but ecopolice don’t always let the facts get in the way of their religion and the green message is even infecting British hospitals which are being encouraged to  serve less meat and cheese  in a misguided attempt to be kinder on the environment.

Hospitals should serve meals which meet the dietry and health needs of the patients at the lowest cost and base their policies on facts not politics.

Less meat and cheese may be better for the health of some patients but not necessarily all and buying local isn’t necessarily better for the environment.

Food transported 100  miles by 10 trucks may have more impact on the environment than having it moved 1000 miles by one truck and as the NZIER figures above show going thousands of kilometres by ship is better than a few by car.

Besides, the distance food travels is only one factor in an assessment of it’s environmental footprint. A Lincoln University study showed New Zealand dairying produced less greenhouse gas than British dairying, even when the shipping was taken into account.

Given how short most hospital stays are these days patients are probably not in danger from the new prescription for their diets, but the implications of the other “green” initiative of greater sterilisation and reuse of equipment could be very serious if it increased the risk of infection.

However, the food miles debate might be academic because sustainability tends to be the concern of those wealthy enough to choose and as the recession bites households and hospitals alike are more likely to be more concerned about how much food costs than how far it travels.

Hat Tip: No Minister


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