New Zealand Executive Government Speech Archive

I'd like to begin by endorsing the comments of Rob Jeffrey. It is a fact of life in agriculture - an unfortunate fact of life - that many of us seem to get behind important fundamental reforms only after hard times. After last year's severe downturn, the pork industry is on the right track.

I'm quite flattered that you've borrowed one of my terms from education - promoting "seamless quality from pasture to plate". More importantly, you're focusing on three fundamentals of marketing that I've been promoting around New Zealand:

• Greater investment in the marketplace
• Greater control over distribution
• Paying farmers for producing what the market wants

The industry has invested in the marketplace to identify potential niche export markets. Producers and processors need to continue that investment. You've recognised that your distribution systems need improving. In particular, you've recognised the need to move away from a carcass grading system towards a system which pays farmers for meeting the specifications demanded by end users, even if that is not necessarily convenient for traders.

And I see recognition, in what Rob has had to say, that the application of these three fundamentals requires long-term relationships at every stage of the process. Pork producers and processors are not primarily in competition with one another. You're in competition with beef farmers, and lamb farmers and deer farmers, and, particularly, with the chicken industry, which I see as your major threat, particularly for control of the breakfast plate.

In many ways, the competition is broader than that. In anything other than subsistence societies, eating has as much entertainment value as nutritional value. Especially as the worldwide trend moves more and more towards eating out, we in the food business are in competition with other forms of entertainment - particularly as we market higher-quality products.

So I see this industry moving down the right track. I endorse your Pork Quality Improvement Process. I see that as in line with what I've been talking about. It does come at a cost for the industry, and people are right to demand assurances that the costs justify the end result. But strategies which guarantee quality from pasture to plate, implemented properly, can lead to tremendous returns, as the deer industry, as just one example, has shown us.

I want to talk today largely about the economic and political environment as we move towards our first MMP election. The election is just over 100 days away, and, despite having something of a vested interest in the result, I want to outline as honestly as possible the prospects for the economy and the pork industry in the new MMP environment.

Before I move on to that, I'm aware that for the last four years, Government speakers have told your conference that the proposed Producer Boards Amendment Act was "soon to be introduced". I regret that I am repeating that message for the fifth year. In fact, I find it quite unacceptable. But I am advised that a draft of the legislation has now been sent to the board for your comment. With a bit of luck and with continuing goodwill, I'm still hopeful that the legislation will be able to sneak through the House prior to the election. If it does not, then its passage this year will depend on either the Government managing to receive a majority of the list vote or on speedy coalition negotiations.

The same is true with the Meat Amendment Bill which promises to move meat inspection into line with your Hazard Analysis Critical Control Point approach, which is consistent with the Pork Quality Improvement Process. Regrettably, the passage of the Resource Management Act Amendment Bill, with or without the definition of "factory farms" including pig farms, also depends on politics.

I'm not going to lose hope that these three pieces of legislation could be completed prior to the election. I will be using whatever influence I have to see them through. But, in your planning, you would be unwise to count on it totally. Throughout agriculture, the seemingly endless delays in getting all this legislation through, demonstrates conclusively the merits of getting parliament out of the sector as far as possible, and putting decision-making power in the hands of the industry itself.

The rising value of the New Zealand dollar concerns pig farmers for a different reason than it concerns many in the rest of the agriculture sector. Your concern is that it makes imported, competing products cheaper.

However, we delude ourselves if we look upon the value of the dollar as some critical indicator of the success of our agriculture sector. New Zealand's dollar plunged for thirteen years from 1979 to 1992. Through that time, some sectors were in trouble more often than not, while others moved forward. If a falling dollar was the solution to our troubles, you'd think we'd be sitting pretty right now. Now that the dollar has recovered some of the ground it lost through the 1980s, we are still seeing some sectors in trouble and some which are receiving record payouts.

I thought that the front page headline on the most recent Federated Farmers' newspaper, Straight Furrow, verged upon being the ultimate in stupidity. "Down she goes! Great news for farmers as the dollar dives" read the headline. If people think that the small drop in the dollar over recent weeks is going to make all the difference to our agriculture sector they are sadly deluded. It is going to make only the tiniest difference short-term and have no impact long-term. For Federated Farmers to pretend otherwise is irresponsible. It does nothing but set farmers up for disappointment.

The only long-term solution to troubles in the farming sector is getting out of commodity trade and into marketing consistent quality consumer products. The answer is in strategies like your Pork Quality Improvement Process, and your branding strategies. The value of any commodity will trend down over time, no matter what it is. There is no future selling "pork", "bacon" and "ham". They are inevitably going to fall in price over time. But "New Zealand Pork", "Trim Pork", "Traditional Pork", "New Zealand Ham" and "New Zealand Bacon" - if of consistent high quality - have the potential to increase in price.

Straight Furrow has a responsibility to inform its readers of that, and not use its front-page to promote silly ideas about the dollar. Rich countries have increasing-value currencies. If we seek to be a rich country - and that is the Government's goal - then the dollar will trend up over time.

If your vision of pig farming is trading low-value products, and seeking false advantages over better, imported products through a falling dollar then the industry has no future. But if your vision is of the industry marketing consistent high-quality products, superior to those produced elsewhere, then you have a great future. That second vision is my vision.

Despite the recent drop, caused by political uncertainty, it is argued by some that the value of the dollar is being kept high by the Government's inflation target of 0-2%. The second most popular political party in New Zealand says that it would abandon the 0-2% target and instead introduce a new target below that of our trading partners.

That would, of course, not help you as you compete with imported products. And I'm not sure how you can predict the inflation rates of your trading partners in advance, but we'll just leave that to one side.

The problem, in any case, for Mr Peters is that Japan already has an inflation rate of -0.5%. And if you trade-weight our competitors' inflation rates, you find that they have an inflation rate about the same as ours already. So Mr Peters contradicts himself. On the one hand, he says he'll abandon the 0-2% target, saying it's too tight. On the other, he says he wants to keep inflation at that level, or lower.

What's frightening for farmers about Mr Peters is that he also proposes to spend up large on social policy. Farmers know what happens when a Government tries to keep inflation low while meeting every spending demand of Wellington lobby groups. We pay higher interest rates.

I find it difficult to attack some of what the previous Labour Government did in opening up our economy. But I have no difficulty attacking them for their over-reliance on monetary policy to control inflation. If a Government spends up large, it will create inflationary pressures. And the only way to control those pressures is to tighten monetary policy and drive up interest rates.

Under the previous Government, over night interest rates passed 100%. 90-Day Bank Bills went well over 25%. Those 90-Day Bank Bills remain under 10% under this Government, despite the political uncertainties caused by Mr Peters' recent rise in the polls. If this election results in a Government other than one led by National, farmers will once again pay the massive interest rates they paid in the mid-1980s. Many farmers, in fact, won't pay them because they'll be driven off their land.

I think it is important that farmers know that, because, amongst the 25% or so of New Zealanders who support New Zealand First, there will be one or two farmers. And, with things looking so tough right now, it's understandable some will be looking for alternatives.

But when farmers focus on Mr Peters' policy on keeping tariffs, along with his high-interest rate policies, I believe they will reassess any support they may be tempted to give him. That will be especially true when they consider the policies of his likely coalition partners, the Alliance and Labour. I do not meet many farmers who want the Employment Contracts Act to be repealed and unions brought back to the centre-stage of policy-making.

Most people, I believe, do want the stability of a National-led Government. The only possible alternative to that result is the three-headed monster of New Zealand First, Labour and the Alliance. I don't believe people will want to take that risk.

Current polling suggests that National will have the most seats in parliament on Sunday 13 October. And I'm confident that there will be sufficient MPs in parliament who have the common sense not to risk returning New Zealand to a nation of high interest rates, high inflation, militant unions and tariffs. It is possible for MPs from different parties to work together. We've seen that already as the sands have shifted through this parliamentary term.

It may seem difficult to imagine any Government being able to emerge from the confusion which may arise after October 12. But common sense will play a major role, at least within National, the sensible wing of Labour, and any United, ACT or Christian Coalition MPs who are elected.

That means that the agriculture sector can plan with a reasonable degree of confidence that the Reserve Bank Act, the Employment Contracts Act the Fiscal Responsibility Act, the low-rate, broad-base, tax system and the open economy will survive the election, along with a National-led Government. It also means that if we do not pass the agricultural legislation prior to the election, we can be confident it will be passed shortly after. That stability will enable your industry to plan with confidence.

I see the pork industry moving in the right direction. You have gone through a difficult time. And while MAF's forecast in SONZA is not overwhelmingly positive, if Rob Jeffrey's sentiments reflect those of the industry, I believe you are in a good position to prove the authors of SONZA wrong. That should be your goal over the year ahead - to invest in the marketplace, to control your distribution lines, to pay farmers for what the market wants and to underline it with long-term relationships and guarantees of quality. That's the way to prove MAF wrong. I look forward to playing my role as Minister of Agriculture to assist you in any way I can - not just for the next 100-odd days, but into the foreseeable future.