Dairy sector contributes $8 billion to GDP

The dairy sector remains New Zealand’s biggest export earner, despite challengingly low milk prices last year, a new report reveals.

The report, Dairy trade’s economic contribution to New Zealand, written by the New Zealand Institute of Economic Research (NZIER) and the Dairy Companies Association of New Zealand (DCANZ), shows dairy contributed $7.8 billion to New Zealand’s GDP in the year to March 2016, or 3.5%.

Of that, almost $6 billion was from dairy farming and $1.9 billion was from dairy processing.

The Minister of primary industries Nathan Guy says the number is a timely reminder of how important dairy is to the New Zealand economy.

“While the dairy sector has had a tough few seasons it still earned $13.6 billion in exports for New Zealand in the year ended March.”

It accounts for more than one in four goods export dollars coming into New Zealand (29% in 2016, down from a high of 35% in 2014).

While the milk price picked up midway through last year, the beginning of the year was much more uncertain.

In March, Fonterra’s forecast was $3.90/kgMS and in May, its opening forecast for the 2016/17 season was $4.25/kgMS.

Fonterra’s latest milk price forecast was $6/kgMS with bank economists forecasting it will go higher.

The report also shows the dairy sector now employs more than 40,000 workers with jobs in this sector growing twice as fast as total employment which has been at an average of roughly 3.7% per year since 2000.

The dairy sector exports twice as much as the meat sector, almost four times as much as the wood and wood products sector and nine times as much as the wine sector while generating almost four times as much export revenue as export education.

Overall, $2.4 billion in wages was paid to dairy farmers and workers in processing in 2016.

The majority of New Zealand’s dairy exports go to Asia (just over half), with Africa, North America, Australia, South America and the EU making up the rest.

“Many of New Zealand’s fastest growing dairy export markets are developing countries in Africa and Asia,” the report says.

“This reflects these markets’ on-going economic development, which is boosting per capita incomes and hence moving dietary products towards dairy and meat and away from staples such as rice, legumes and pulses.”