John Key MP
Leader of the National Party

18 July 2007

Playing to Our Strengths

Speech to Federated Farmers Annual Conference
Langham Hotel, Auckland, 2.10pm

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Thank you for the invitation to speak to you today.

Federated Farmers has a long and proud history of serving farmers and serving New Zealand.

Your advocacy for farmers and the rural sector has served your members and their communities well. Your advocacy for an open economy and demand for better government policy has paid huge dividends for this country. And your relationship with the National Party over many decades has enriched both our organisations.

We share many of the same values - a firm belief in free enterprise and individual responsibility, a deep respect for property rights, a realisation that governments don't have the answer to every problem, and a conviction that hard work, initiative, ambition, and success should be encouraged and celebrated, not taxed and regulated out of existence.

Listening to your concerns and talking with farmers up and down the country will play a big part in shaping our policies, and that's what I'd like to talk about today. It's vitally important we get our policy settings right, because this country, and agriculture in particular, faces some great opportunities.

Agriculture has always been, and will continue to be, vital to New Zealand's prosperity. When conditions are good at the farm gate, this flows through into the small towns, into the provincial cities and ultimately into Auckland, Wellington and Christchurch. And it's the same when things aren't going well. To paraphrase an old saying, when the primary sector sneezes, the New Zealand economy catches a cold.

Dairy products, meat, fibre, timber and other primary produce currently make up two-thirds of New Zealand's merchandise exports. This is despite our producers battling in international markets against competitors who are protected by trade barriers and who exist to a large extent because of state subsidies.

And yet people are always popping up to say that agriculture is a sunset industry, and that we need to develop high-tech, so-called "knowledge industries" to compete in the future. I think these people are mistaken.

Don't get me wrong. It is great that we are developing innovative and sophisticated industries in new areas of the economy like IT and design. But in the foreseeable future these types of businesses will not match the huge and growing earning power of our primary industries.

In addition, such thinking fails to acknowledge that our primary sector is already a knowledge industry. After all, it takes an enormous amount of knowledge to convert soil nutrients and sunlight into an export-quality rack of lamb that meets the ever-changing desires of the consumer.

Our agriculture is already innovative and sophisticated, and it's becoming more so every day. Anyone strolling around Fieldays last month could see that.

Far from being a sunset industry, agriculture has been one of the success stories of the New Zealand economy. It is one of our greatest strengths, where we have genuine competitive advantages.

The development paths of rich, small, open, resourced-based economies such as Finland and other Nordic countries, as well as Australia and Canada, are remarkably similar. New, successful, sophisticated industries haven't just sprung out of the blue. They have emerged from traditional sectors within those economies that have genuine competitive advantages.

So we must not undervalue the ability of agriculture to act as a catalyst for higher value industries.

Those who trumpet Icebreaker, for example, as a model for economic transformation, seldom acknowledge that its success comes from the sheep's back. Would it have been as successful if we didn't have traditional strength in fine wool?

Of course New Zealand needs to develop innovative and sophisticated businesses in new areas of the economy. But I firmly believe that focusing on the areas where we have competitive strengths, such as agriculture, will pay a much bigger dividend than focusing on areas where we don't.

The future is bright

Farming has done well in recent times. Booming world commodity prices, rising farm values, and improved farm productivity have helped boost farmers' incomes and assets. But this success isn't spread equally across the sector.

On the one hand, we have dairy farmers anticipating good payouts. On the other, we have sheep and beef farmers weighed down by an over-valued exchange rate and struggling meat companies. Somewhere in between are farmers growing everything from crops and venison to fine wool.

We can't afford to just accept the way things are and trust that the successes in dairying will continue, while hoping that things will come right in the other sectors. We need to do better than that.

I firmly believe that our future and the future of New Zealand agriculture is very bright. The next decade will be very good for commodity prices, and for agricultural prices in particular. And that will be very good for New Zealand.

There are two reasons for this.

The first is Asian development. We are seeing the rise of a massive middle class in China and India, with appetites that will become more sophisticated and more discerning as they become wealthier and better educated - appetites that will hunger for the innovative, high-quality, agricultural products that New Zealand produces.

The second is climate change. Growing demand for improved environmental performance will present enormous opportunities for New Zealand farmers.

Our natural gifts - a low population, relatively plentiful water, a temperate climate moderated by the ocean around us - give us an advantage over almost every other agriculture-based economy.

And the policies other governments are taking to tackle climate change can have benefits for us. Already, several countries have introduced biofuel targets to encourage renewable energy - biofuel which must be grown on land that was once growing food crops. The corresponding decrease in crop-land has boosted food prices around the world.

But we won't make the most of these opportunities by standing around and waiting for them to wash over us. We won't maximise our bright future with poor government policies and a regulatory structure that prevents farmers doing the best job they can.

We need to build on the successes our primary industries have achieved. We need to make long-term and enduring gains for our country - gains that will bring further advantages for agriculture, horticulture and forestry, boost our productivity, and ensure New Zealand's success. We need, in short, to play to our strengths.

And so National is concentrating on three areas where we believe the government can make a real difference and help our primary industries exploit the opportunities the next decade will bring.

First, we need to get the basics right. We need to strengthen our rural communities so our farmers, fruitgrowers, foresters, winegrowers, and the industries that support them, can develop and grow as their needs evolve.

Secondly, we need a credible and practical approach to climate change which makes the most of our natural advantages and enhances our clean and green brand.

And thirdly, we need a research and innovation strategy that builds on our traditional agricultural strengths, encourages new businesses and ideas to develop from them, boosts our productivity, and lifts New Zealand's future prosperity.

Supporting our rural communities

I've been fortunate over the past six months to visit many farms and speak with farmers and their families, to get an understanding of their concerns, and to learn what the government needs to do to provide them with the right conditions to succeed.

I'm blown away by the knowledge and passion I have seen, and the original and innovative thinking that farmers employ to get the most out of their properties. It's this knowledge, passion, and thinking that make our farmers world leaders. And they deserve nothing less than world-leading government policies to help them do their jobs.

I'm lucky to have so many farming MPs in our caucus. Whenever I try to confirm exactly how many there are, several more come out of the woodwork and tell me they live on a farm, own a farm, or grew up on a farm - and demand to be counted as farmers!

It's fair to say that the farming influence in National is far greater than in any other political party. Our farming MPs, led by David Carter, are intimately aware of the problems, challenges, and opportunities that farmers and rural communities face.

And over the past few months they have done something that I am very proud of - they have put together our Rural Issues Discussion Paper. This examines the big issues facing farming and what the government can do to get the basics right so farmers can get on with what they do best - earning the foreign exchange this country needs.

I'm especially proud that the discussion paper doesn't focus just on farmers and farming. It also looks at how we can strengthen our rural families and their communities by taking a rural look at health, law and order, and education. Too often, these issues are seen by this Government only from an urban perspective - because that's where most of their voters are!

In contrast, National knows that our rural communities are unique - that farmers can only be the backbone of the economy if their families and the rural services they rely on are healthy.

I launched the discussion paper last month at Fieldays, and it's available on the National Party website. We have already received a lot of feedback from farmers and people involved in agriculture, and I'm looking forward to the input of Federated Farmers and other leaders in the industry.

I urge you to read it and let us know what you think. Your feedback will help us develop the agricultural policies you need to make your businesses successful.

There is a lot we are looking at.

We need to reduce the cost burden that Labour has imposed on our rural industries and cut compliance costs. This includes reintroducing competition in accident insurance.

We also want to reform the Resource Management Act. I know, as you do, that it is an expensive process to get resource consents for farming activities. We want to reduce delays, legal costs and the complexity of regional and district plans, as well as eliminate the potential for frivolous objections.

We need to clearly define and protect property rights. National wants to encourage farming families to be good stewards of the land, and that means they need the confidence to invest in their properties and enhance the rural environment.

Farmers won't do that if the government tells them they are not allowed to say who goes on their property, or if the government hikes their leases by 600%.

We need to support a skilled and flexible labour market. This includes developing initiatives to support rural education, from our national standards policy for primary and intermediate schools, through to on-farm training for students who want to pursue a farming career.

And last month I announced several initiatives to put trades training back into schools and give kids a more practical education - in areas from carpentry to agriculture.

We need to protect our unique agricultural environment. Our competitive advantages rely, in a big way, on our island status, our lack of diseases such as BSE and foot & mouth, and our ability to keep out invasive species. We need stronger border control and harsher penalties for those who threaten our biosecurity.

And we need to invest wisely and widely in our over-stretched infrastructure.

Rising council rates are a concern in rural areas. The Government has been loading up councils with too many extra responsibilities and unnecessary regulations without any funding or room for local solutions. We need to find better ways to finance the necessary investment in infrastructure, by both local and national government.

We will ensure the supply of energy to our rural communities. Sometimes that means we'll need to fast-track sensible energy projects, while making sure landowners get adequate compensation when their land is taken under the Public Works Act.

We need to investigate effective, efficient, and fair ways to allocate water-use rights while protecting the environment. We're open to ideas about how best to do that, and tradable water rights may be an option.

And it will be one of National's economic priorities to dramatically lift the speed and coverage of broadband Internet, so farmers, their families, and the industries that support them can make the most of the Internet and the technologies that will help them enhance their competitive advantages.

Getting the basics right won't be easy. But with your help and your input, I'm confident we can develop the right policies for New Zealand's agricultural future.

Tackling climate change

One of the areas where it is vital to get our policies right is climate change.

Climate change, and the perceptions people have around it, will have a massive impact on the brand image of New Zealand and global demand for our products. Our reputation for having a clean, green, healthy environment is at stake.

If we can seize the initiative and put the right policies in place, we can enhance our brand, and give consumers another reason to buy our products.

So I don't really see climate change as a threat. I see it more as an opportunity for New Zealand, for New Zealand agriculture, and for our products. Our farmers are more flexible, more innovative, and more responsive to world markets than farmers almost anywhere else. If anyone can seize the opportunities that climate change awareness brings, we can.

That's why National has set a target of reducing our net carbon emissions by 50% by 2050, or 50 by 50. And that's why National will stand by our commitment to Kyoto.

Our climate change policy contains a number of sensible measures that will help us reduce our emissions, encourage tree-planting, enhance our clean and green brand, and unlock the potential that increasing climate change awareness will provoke.

We will also put a greater focus on research and development.

Technology, based on good science, will be the key to reducing our agricultural emissions. In the history of New Zealand farming, the big challenges have been met using world-leading agri-science and technology - shipping frozen meat halfway round the world, for example, or topdressing with superphosphate.

With climate change, our big challenges will be to find ways to make the digestion of our livestock more efficient, to grow new forage varieties, to use fertilisers in a better way, and to develop climate-friendly food that the world will pay a premium for.

No country has more to gain. And arguably, no country is in a better position to find solutions. We already corner the world market for science skills in ruminant biology, but we need more researchers working in this area. If we can find the key to reducing livestock emissions, we can develop technology that will be extremely valuable on the world market.

Research and innovation

But climate change is not the only area where successes in research and innovation will have big payoffs for our primary sector.

Smart Kiwi businesses with strong agricultural know-how are starting to exploit growing niches in the global marketplace. Developments in biotechnology, nutraceuticals, dietary supplements, hi-tech fibres and organic foods are enhancing the earnings of our more traditional sectors.

Large businesses like Fonterra and PGG-Wrightson are reaching beyond our shores. They are using their expertise to take a big stake in foreign agricultural industries.

To make the most of these opportunities and those that will emerge over the coming decades, we need to constantly improve the efficiency, productivity and wealth-generating capacity of agriculture in every one of its activities. Getting the government's role in research and innovation right will play a big part in maximising those improvements.

We need to improve the focus of government research spending to cut out bureaucracy and paperwork.

We need a business environment that makes it worthwhile for businesses to invest in R&D.

We need to support the exchange of people and ideas between research institutions, universities, agricultural businesses, and farms.

And we need to strengthen our intellectual property protection and get better at adapting research from overseas.

These are just some of the things we are looking at as we put together our research and innovation policy. We believe they can provide a sustained boost to development across the agricultural sector, and enhance New Zealand's competitive advantages.

Conclusion

National has a lot of work to do. And we have a lot that we want to get right.

The future for our agriculture is bright, but we can't just rest on past successes. We can't get by with a poor regulatory structure. We need to seize our opportunities and build a better future. We need to play to our strengths.

Getting the basics right is essential. We want to support our rural communities so farmers and their families can invest, develop, and grow their businesses and secure their futures on the land. And we want your feedback on our Rural Issues paper to help us do that.

We will implement our climate change policy, which is credible, practical and clear. It will enhance our clean and green brand, and provide certainty to agriculture and every other sector of the economy.

And we will focus our research and innovation on maximising our competitive advantages. That way, we can boost our productivity growth and improve incomes across the economy.

We have a lot of work to do to develop the right policies for our primary industries - to build on their successes to ensure they make the most of the opportunities the future will bring, and to secure New Zealand's long-term prosperity and success.

We look forward to working with you as we develop these policies in the run-up to the next election.

Thank you.

ENDS

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