22 Feb 2017

Dairy sector contributes 3.5% to GDP - report

10:48 am on 22 February 2017

A new report into the economic contribution from dairy trade shows that the dairy sector contributes $7.8 billion, or 3.5 percent, to New Zealand's Gross Domestic Product.

Organic Jersey cow on a Rongotea farm.

Photo: RNZ / Alexander Robertson

The research was done by the New Zealand Institute of Economic Research (NZIER) and commissioned by the Dairy Companies Association of New Zealand (DCANZ).

It confirmed that the dairy sector was still the largest export sector for New Zealand, despite the slump in dairy prices, with an export value of $13.6b in the year to March 2016.

DCANZ chair, Malcolm Bailey, said the report showed that the dairy sector was still making a big contribution to New Zealand's economy.

"This report validates something that we feel has been the case, that you need to get some independent analysis and scrutiny to make sure that we aren't making claims that make us feel good, that we can actually back them up with research."

The report also highlighted the importance of trade agreements, Mr Bailey said.

"Trade barriers are a significant cost to New Zealand. Tariffs alone are suppressing the value of our dairy products by around $1.3b annually.

"On top of this, non-tariff measures add over $3 billion in costs to New Zealand dairy exports in the APEC region alone."

The report analysed the economic contribution to regions and found that dairy farmers are spending $12.2b on goods and services within their communities.

In the Waikato, the West Coast and Southland dairy sector spending accounted for more than 10 percent of regional GDP.

NZIER's deputy chief executive, John Ballingal, said the dairy employment had grown by an average of 3.7 percent a year over the past 15 years and the number of people employed by the dairy sector was now about 40,000.

"What we're seeing is more and more people going into processing, and this is resulting in a lot of high value jobs.

"The average wage of a dairy processor worker is $73,000 and the wage bill for the dairy sector is around $2.4b per year."

Mr Ballingal said the data collected for the report showed that the dairy sector was resilient and was facing up to its challenges.