New Zealand Executive Government Speech Archive

Chairman Pat Morrison; Ladies and Gentlemen. The launch of this Fernmark Quality Programme is a very important development for the future of New Zealand's wool industry. I commend those who had the vision and did the hard work to bring it to fruition. It will enable us to better assure the quality of New Zealand wool - a prerequisite for moving away from the auction system towards direct marketing. I'll tell you why I see that approach as so important.

Round the world, wool is facing competition from competing fibres - most of which are becoming cheaper and cheaper. In 1995/96, international demand for wool weakened. The average price to New Zealand growers fell by 8% to an estimated $5.10 kg clean. Things are expected to improve a little in 1996/97, but the overall trend is scarcely in doubt.

Over the last 30-odd years - in fact the last couple of hundred years - the real price of all commodities has fallen - whether wool, meat or electronic equipment. And as we look ahead, while there will be the odd bump upwards, the general trend will be down. What's more, if New Zealand continues on its track of being a low inflation, high employment, growing economy, the value of our dollar will trend upwards, admittedly with the occasional fall. Wool as a commodity will be worth less and less in real terms to New Zealand growers.

What's important, throughout the agriculture sector, is that when international prices increase a little over the next year, and especially if the dollar drops a bit because of election uncertainties, we don't see that as the solution to our troubles. We've fallen for that trap too often - the trap of thinking the solution to our troubles can be in some short-term economic fix rather than on focussing on the international market.

Whichever way you look at it, over the long-term, real prices for commodity goods will be down, whatever short-term political promises some might put forward. That's a challenge we have faced before. We've responded by making our agriculture sector the most efficient in the world. We will need to continue to make those improvements, and I'm confident we will, but we also have to focus more than ever before on the market.

The future of the wool industry - indeed of the entire agriculture industry - cannot be in selling commodity products. I'm hard pressed to think of any system guaranteed to return less to the grower than selling commodity wool on the auction system.

The future of the industry can only be in establishing long-term supply arrangements with foreign buyers of the exact specification of product they want, when they want it. Exporters need to be involved in long-term arrangements with growers, so that growers produce the specification of wool required. Everyone involved in production from the farm to the end user needs to sign up to - and stick to - quality standards. Underpinning it must be a continued focus on research and development which also takes account of international demand.

This Fernmark Quality Programme is an important step forward in that process of guaranteeing consistent quality of our wool. As Pat Morrison said, it's the world's first comprehensive, integrated wool industry quality assurance scheme. And it's more than that. It joins programmes like the Game Industry Board's Zeal as being an example to the rest of the primary sector. It includes the farmer, the shearer, the wool handler, the wool broker, the wool scourer, the wool exporter and the manufacturer. It means that when foreign buyers buy Fernmark wool, or products made from Fernmark wool, they know the quality of product they are getting.

That certainty is worth something to those buyers. They'll be willing to pay a premium for it. It is only by extracting those premiums from the market that New Zealand growers can be protected from the poor outlook I described earlier. More than that, it provides the possibility of increasing real returns, long term.

There's no short-term economic fix to problems in our primary industries that wouldn't mean higher interest rates and higher inflation a year or so down the track. But there is a medium to long-term marketing fix. That fix is moving away from commodity trading to direct marketing of branded consumer products. That's the long-term solution. The Fernmark Quality Programme is an essential step towards it. I'm very happy to endorse the programme and urge growers, and everyone else in the wool industry, to get behind it, and get involved.