THE ANZ JERSEY NEW ZEALAND CONFERENCE AND AGM
Associate Minister of International TradeEGMONT HOTEL, NEW PLYMOUTH
Special guests, ladies and gentlemen. It is indeed a pleasure to be here today at the AGM and Conference of Jersey New Zealand.
Before I start I would like to first offer apologies on behalf of the Prime Minister and local MP Jim Bolger, who unfortunately is unable to attend.
As you may be aware, things are busy in Wellington as we work towards the first Coalition budget and the Prime Minister, like the rest of us can only be in one place at one time. However, he sends his good wishes to you and for the success of your Conference and AGM.
I understand that Jerseys made their first appearance in Taranaki when William King Hulk purchased his first cow, Jenny, at Marton in 1876 and led her home 130 miles to Bellblock.
It is recorded that Jenny was champion cow at New Plymouth show for three successive years. Jerseys are recorded as being in the area by the street name Jersey Place and Mr Hulk is remembered by the name of Hulk Crescent. There is also a plague in the centre of the Bellblock Cemetery recording his epic journey. I guess Jenny was the inaugural bovine member of the North Taranaki Jersey Club, who are hosting this Conference and AGM. Jenny and other Jerseys like her have made an enormous contribution to the New Zealand dairy industry and our economy since 1876.
Last year the New Zealand dairy industry exported $4.4 billion in exports.
Last week I dropped by at your stand at the Fielddays. I picked up a report by Dr Rysard Skrzypek PhD, scientific advisory to the World Jersey Cattle Bureau, which outlines what he sees as Jersey's key advantage, and they are:
1 litre of Jersey milk contains 20% more protein, minerals, vitamins and bacteriostatics than other breeds
Jerseys produce the same amount of milk per unit of body weight as larger breeds
Smaller body size means more cows per hectare
39% greater rumen capacity - more efficient utilisation of roughage - 20% lower feed costs
Less difficult births, stillborn calves and reproductive disorders
Lower mastitis incidence
Higher heat tolerance - suitable for crossbreeding with tropical cattle
Worldwide acceptance for crossbreeding to improve dairy traits also suitable for crossbreeding with beef bulls
I know that I will not need to talk any further to this audience about advantages of the Jersey breed because of your considerable commitment to the breed demonstrated by your efforts setting up Jersey New Zealand.
Size and Role of Government:
Personally I believe the size and role of Government in the New Zealand community and economy is still too big. We need less government, both central and local, and more private enterprise.
We often envy our Asian neighbours for their impressive growth. While we have reduced the size of our Government spending from in excess of 40% of GDP to about 33%, our successful Asian neighbours are running their governments at about 20% of GDP.
When we look at this statistic, along with the recently released study by Professor Scully, 20% of GDP seems a more optimal size of government for the good of New Zealand.
But how do we get to this more sensible level so that dairy farmers can get on with the job with less government interference?
There are two avenues. Firstly by reducing the size and role of government, and secondly, by growing GDP. I believe if we continue on the first the second will follow. Conversely if we don't, our growth rates will suffer and not be as good as they could be
To reduce the size of Government I believe we need to continue the privatisation process. This is to unlock the innovation, the drive, the kiwi ingenuity and investment that private enterprise and freedom from political intervention can offer.
This is not a criticism of the way that the current state corporations are run, - in general they are well run given the constraints they have. Their levels of performance are incredible compared to the old Government department models, pre corporatisation.
But they are required to be risk averse and are restricted in their ability to invest and to take opportunities they may want to take. Their accountability is still foremost to the political market rather than to the discipline of the capital markets. Local Government should also sell off assets that commonsense says they should not keep. Dairy and other farmers should not be required to pay higher rates and effectively underwriting the risk of Local Government owning and operating such assets.
We also need to continue to encourage contestability and contracting out where possible those public sector services in both Central and Local Government. Monopoly providers of services have little incentive to improve performance.
I believe that Government should ultimately only perform the absolute necessary core functions. I again include Local Government in this.
Local government continues to raise rates and charges in excess of the rate of inflation which is one of the key drivers to inflationary pressure. This doesn't help hard working Jersey dairy farmers at all.
Monopolies in society need to be progressively opened up to competition. The monopolies that government legislation and regulation often impose on its citizens, such as with pharmacies, conveyancing, optometrists, registered teachers, and local government and the marketing of primary produce impose costs. We are currently looking at a few of these.
Good competition policy has seen tremendous reform and growth in former public monopoly areas such as airlines, electricity, gas, telecommunications.
In my own portfolios we are doing quite a bit on increasing contestability. Portions of Fisheries, Commerce, and Lands functions are becoming contestable, and some functions have been split to enable contestability in the future.
Government doesn't create wealth, it merely transfers it. Unless dairy farmers and other business create wealth and prosper then our standard of living will fall and we will lose the ability to have both a socially cohesive and an environmentally friendly society.
The question must always be asked, why should the government operate in areas which private enterprise might be more successful?
Why should government get involved if all it is doing is imposing a toll and imposing additional total costs on the nation. Why should Government impose legislation and regulation on individuals and industries if all it does is constrain them from productive activity.
The opportunity costs of this activity according to Professor Scully are high. And it is important to ensure that private sector innovation and investment is not crowded out or constrained by government activities.
Growing GDP:
To grow GDP, I believe if we continue to move on the above issues we will contribute to growth. However, we have a few other things to do as well. It is vital for New Zealand that we maintain an open internationally competitive economy. Key platforms for this are:
deregulated, competitive and open markets
stable macroeconomic policies
continuing the current policy of tariff reductions
where required, quality public services provided as efficiently as possible as previously mentioned
and the lowest possible tax rates
The success of our Asian neighbours has generally been in the industries that have been exposed directly to the pressures of the international market place, rather than those that Governments have tried to pick as winners.
There is plenty of evidence of formerly highly protected areas of NZ industry and commerce becoming internationally competitive only when local protection has been withdrawn. (eg textiles)
Import licensing and high tariffs have gone and we will continue to reduce and eliminate remaining tariff protection.
These changes although not always comfortable, force NZ business to continue to innovate and be internationally competitive. An open economy allows New Zealand industry better access to ideas, products, investment and markets
Another dimension for Government is ensuring that New Zealand traders are able to operate effectively in international markets, both exporting and investing.
Less Politics, more profit.
I note in your Jersey New Zealand "Phase One" Mission Statement you say and I quote "we wish to become an organisation that will help increase the income of every farmer milking and breeding Jersey cattle in this country. An organisation that will be business and market orientated and an organisation that will be innovative and forward thinking in all aspects to achieve the Mission of Jersey New Zealand".
I was pleased to read this because I have been saying for some considerable time that one of the biggest impediments to progress in the dairy industry and agriculture in general, is politics.
It is therefore very pleasing to see an organisation such as yours not mention the word "politics" but instead "increasing income", "market orientated", and "innovation". You are right. This is "forward thinking".
My concern is that whilst Jersey New Zealand may have recognised this, many in the dairy industry still believe that political capital is more important than investment capital.
When we look at the future of the dairy industry it is vital that we remove barriers to progress.
I share your concerns about the declining returns to New Zealand dairy farmers.
I note recent reports (The Dominion, Friday 13 June) that the average dairy farmer producing 50,000 kgs of milk solids a year lost about $25,000 last season in income and is expected to lose the same amount next season. That is $50,000 over two years, a lot of cold hard cash.
The Straight Furrow of June 9 ran a headline " Payout dips but board performs well - Sir Dryden". I would beg to differ with this headline. New Zealand dairy farmers have to suffer on average a $50,000 loss in income.
I believe that serious questions need to be asked about the performance of the existing industry structure.
As mentioned previously, Government must increase competition and remove monopolies in a range of areas in our economy.
This is in order that farmers and other New Zealanders can receive a variety of goods and services and a competitive price, and benefit from the innovation that competition brings.
But whilst we have light handed regulation in some parts of our economy it appears that in agriculture, the area where we have greatest comparative advantage over the rest of the world, we continue to have heavy regulation.
My personal belief is that statutory producer boards are outdated. If we are to continue to compete in the international market place while increasing dairy farmers standards of living, producer boards need dramatic change.
The New Zealand dairy farmer is one of the few groups that are forced by Government to sell the fruits of their labour to only one buyer. I just hope that farmers realise the risks involved. It appears to me that in agriculture, like in another important sector, education, politics rather than performance dominates.
The inability to see open investment and greater innovation is costing dairy farmers in New Zealand. Restricting investment and competition, prevents much innovation and the Kiwi ingenuity that New Zealand is famous for.
It is vital that the dairy industry move forward and progress towards realising its full potential so that dairy farmers can make a good return on their efforts and assets.
I will to continue to raise what I believe is the most important issue in the dairy industry and that is profit, and getting Government and politics out of the industry. We need even more focus on increasing dairy farmers returns irrespective of weather they run Jersey herds or some of those other breeds that we hear about sometimes.
Conclusion:
In conclusion thank you once again for having me to speak with you today. I hope that the coming dairy season is a productive and profitable one. I see from your programme that you have had a week of it so far, covering a range of areas. I wish you all the best in the remainder of your Conference and AGM. I now officially declare the Jersey New Zealand Conference and AGM open.
Thank you.EGMONT HOTEL, NEW PLYMOUTH
Special guests, ladies and gentlemen. It is indeed a pleasure to be here today at the AGM and Conference of Jersey New Zealand.
Before I start I would like to first offer apologies on behalf of the Prime Minister and local MP Jim Bolger, who unfortunately is unable to attend.
As you may be aware, things are busy in Wellington as we work towards the first Coalition budget and the Prime Minister, like the rest of us can only be in one place at one time. However, he sends his good wishes to you and for the success of your Conference and AGM.
I understand that Jerseys made their first appearance in Taranaki when William King Hulk purchased his first cow, Jenny, at Marton in 1876 and led her home 130 miles to Bellblock.
It is recorded that Jenny was champion cow at New Plymouth show for three successive years. Jerseys are recorded as being in the area by the street name Jersey Place and Mr Hulk is remembered by the name of Hulk Crescent. There is also a plague in the centre of the Bellblock Cemetery recording his epic journey. I guess Jenny was the inaugural bovine member of the North Taranaki Jersey Club, who are hosting this Conference and AGM. Jenny and other Jerseys like her have made an enormous contribution to the New Zealand dairy industry and our economy since 1876.
Last year the New Zealand dairy industry exported $4.4 billion in exports.
Last week I dropped by at your stand at the Fielddays. I picked up a report by Dr Rysard Skrzypek PhD, scientific advisory to the World Jersey Cattle Bureau, which outlines what he sees as Jersey's key advantage, and they are:
1 litre of Jersey milk contains 20% more protein, minerals, vitamins and bacteriostatics than other breeds
Jerseys produce the same amount of milk per unit of body weight as larger breeds
Smaller body size means more cows per hectare
39% greater rumen capacity - more efficient utilisation of roughage - 20% lower feed costs
Less difficult births, stillborn calves and reproductive disorders
Lower mastitis incidence
Higher heat tolerance - suitable for crossbreeding with tropical cattle
Worldwide acceptance for crossbreeding to improve dairy traits also suitable for crossbreeding with beef bulls
I know that I will not need to talk any further to this audience about advantages of the Jersey breed because of your considerable commitment to the breed demonstrated by your efforts setting up Jersey New Zealand.
Size and Role of Government:
Personally I believe the size and role of Government in the New Zealand community and economy is still too big. We need less government, both central and local, and more private enterprise.
We often envy our Asian neighbours for their impressive growth. While we have reduced the size of our Government spending from in excess of 40% of GDP to about 33%, our successful Asian neighbours are running their governments at about 20% of GDP.
When we look at this statistic, along with the recently released study by Professor Scully, 20% of GDP seems a more optimal size of government for the good of New Zealand.
But how do we get to this more sensible level so that dairy farmers can get on with the job with less government interference?
There are two avenues. Firstly by reducing the size and role of government, and secondly, by growing GDP. I believe if we continue on the first the second will follow. Conversely if we don't, our growth rates will suffer and not be as good as they could be
To reduce the size of Government I believe we need to continue the privatisation process. This is to unlock the innovation, the drive, the kiwi ingenuity and investment that private enterprise and freedom from political intervention can offer.
This is not a criticism of the way that the current state corporations are run, - in general they are well run given the constraints they have. Their levels of performance are incredible compared to the old Government department models, pre corporatisation.
But they are required to be risk averse and are restricted in their ability to invest and to take opportunities they may want to take. Their accountability is still foremost to the political market rather than to the discipline of the capital markets. Local Government should also sell off assets that commonsense says they should not keep. Dairy and other farmers should not be required to pay higher rates and effectively underwriting the risk of Local Government owning and operating such assets.
We also need to continue to encourage contestability and contracting out where possible those public sector services in both Central and Local Government. Monopoly providers of services have little incentive to improve performance.
I believe that Government should ultimately only perform the absolute necessary core functions. I again include Local Government in this.
Local government continues to raise rates and charges in excess of the rate of inflation which is one of the key drivers to inflationary pressure. This doesn't help hard working Jersey dairy farmers at all.
Monopolies in society need to be progressively opened up to competition. The monopolies that government legislation and regulation often impose on its citizens, such as with pharmacies, conveyancing, optometrists, registered teachers, and local government and the marketing of primary produce impose costs. We are currently looking at a few of these.
Good competition policy has seen tremendous reform and growth in former public monopoly areas such as airlines, electricity, gas, telecommunications.
In my own portfolios we are doing quite a bit on increasing contestability. Portions of Fisheries, Commerce, and Lands functions are becoming contestable, and some functions have been split to enable contestability in the future.
Government doesn't create wealth, it merely transfers it. Unless dairy farmers and other business create wealth and prosper then our standard of living will fall and we will lose the ability to have both a socially cohesive and an environmentally friendly society.
The question must always be asked, why should the government operate in areas which private enterprise might be more successful?
Why should government get involved if all it is doing is imposing a toll and imposing additional total costs on the nation. Why should Government impose legislation and regulation on individuals and industries if all it does is constrain them from productive activity.
The opportunity costs of this activity according to Professor Scully are high. And it is important to ensure that private sector innovation and investment is not crowded out or constrained by government activities.
Growing GDP:
To grow GDP, I believe if we continue to move on the above issues we will contribute to growth. However, we have a few other things to do as well. It is vital for New Zealand that we maintain an open internationally competitive economy. Key platforms for this are:
deregulated, competitive and open markets
stable macroeconomic policies
continuing the current policy of tariff reductions
where required, quality public services provided as efficiently as possible as previously mentioned
and the lowest possible tax rates
The success of our Asian neighbours has generally been in the industries that have been exposed directly to the pressures of the international market place, rather than those that Governments have tried to pick as winners.
There is plenty of evidence of formerly highly protected areas of NZ industry and commerce becoming internationally competitive only when local protection has been withdrawn. (eg textiles)
Import licensing and high tariffs have gone and we will continue to reduce and eliminate remaining tariff protection.
These changes although not always comfortable, force NZ business to continue to innovate and be internationally competitive. An open economy allows New Zealand industry better access to ideas, products, investment and markets
Another dimension for Government is ensuring that New Zealand traders are able to operate effectively in international markets, both exporting and investing.
Less Politics, more profit.
I note in your Jersey New Zealand "Phase One" Mission Statement you say and I quote "we wish to become an organisation that will help increase the income of every farmer milking and breeding Jersey cattle in this country. An organisation that will be business and market orientated and an organisation that will be innovative and forward thinking in all aspects to achieve the Mission of Jersey New Zealand".
I was pleased to read this because I have been saying for some considerable time that one of the biggest impediments to progress in the dairy industry and agriculture in general, is politics.
It is therefore very pleasing to see an organisation such as yours not mention the word "politics" but instead "increasing income", "market orientated", and "innovation". You are right. This is "forward thinking".
My concern is that whilst Jersey New Zealand may have recognised this, many in the dairy industry still believe that political capital is more important than investment capital.
When we look at the future of the dairy industry it is vital that we remove barriers to progress.
I share your concerns about the declining returns to New Zealand dairy farmers.
I note recent reports (The Dominion, Friday 13 June) that the average dairy farmer producing 50,000 kgs of milk solids a year lost about $25,000 last season in income and is expected to lose the same amount next season. That is $50,000 over two years, a lot of cold hard cash.
The Straight Furrow of June 9 ran a headline " Payout dips but board performs well - Sir Dryden". I would beg to differ with this headline. New Zealand dairy farmers have to suffer on average a $50,000 loss in income.
I believe that serious questions need to be asked about the performance of the existing industry structure.
As mentioned previously, Government must increase competition and remove monopolies in a range of areas in our economy.
This is in order that farmers and other New Zealanders can receive a variety of goods and services and a competitive price, and benefit from the innovation that competition brings.
But whilst we have light handed regulation in some parts of our economy it appears that in agriculture, the area where we have greatest comparative advantage over the rest of the world, we continue to have heavy regulation.
My personal belief is that statutory producer boards are outdated. If we are to continue to compete in the international market place while increasing dairy farmers standards of living, producer boards need dramatic change.
The New Zealand dairy farmer is one of the few groups that are forced by Government to sell the fruits of their labour to only one buyer. I just hope that farmers realise the risks involved. It appears to me that in agriculture, like in another important sector, education, politics rather than performance dominates.
The inability to see open investment and greater innovation is costing dairy farmers in New Zealand. Restricting investment and competition, prevents much innovation and the Kiwi ingenuity that New Zealand is famous for.
It is vital that the dairy industry move forward and progress towards realising its full potential so that dairy farmers can make a good return on their efforts and assets.
I will to continue to raise what I believe is the most important issue in the dairy industry and that is profit, and getting Government and politics out of the industry. We need even more focus on increasing dairy farmers returns irrespective of weather they run Jersey herds or some of those other breeds that we hear about sometimes.
Conclusion:
In conclusion thank you once again for having me to speak with you today. I hope that the coming dairy season is a productive and profitable one. I see from your programme that you have had a week of it so far, covering a range of areas. I wish you all the best in the remainder of your Conference and AGM. I now officially declare the Jersey New Zealand Conference and AGM open.
Thank you.