EDS report shoots down DairyNZ conclusions re freshwater

Wednesday, 18 December 2019, 10:04 am
Press Release: Environmental Defence Society

The Environmental Defence Society (EDS) has released a memorandum from respected University of Auckland economist Professor Tim Hazledine, which analyses the economic modelling commissioned by DairyNZ. He concludes that DairyNZ has misinterpreted its economic modelling and misrepresented the impact of the freshwater reforms.

“We were concerned that DairyNZ had not accurately described what the modelling it commissioned said, and that it was putting a self-serving spin on the data,” said EDS CEO Gary Taylor.

“It is our contention, supported by Professor Hazledine, that DairyNZ grossly overstated the potential negative impacts of the reforms on the sector and on the wider New Zealand economy, when its own modelling shows the opposite. In our opinion DairyNZ is trying to avoid having to meet mandatory freshwater limits and is instead seeking to substitute what it euphemistically calls “good management practice” which is not going to cut the mustard.

Professor Hazledine was commissioned by EDS to review whether there was a reality gap between the model outputs and the DairyNZ conclusions.

“My conclusion is that the computable general equilibrium (GCE) models used by Sense Partners and Infometrics showed the same result: that New Zealand’s economic wellbeing would be slightly improved by the imposition of the proposed freshwater quality standards,” said Professor Hazledine.

“In its press release DairyNZ focused on scenario 3 which it said resulted in a cost to New Zealand of $6 billion a year by 2050 and a 24% reduction in milk production.

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“With respect to the first point, New Zealand overall is forecast in the modelling to be slightly better off in economic terms as a result of the freshwater policies. Table 1 of the Infometrics report forecasts that Real Gross National Disposable Income will be about $1 billion / year (0.2% of GDP) higher even under Scenario 3.

“With respect to the second point, the modelling shows that a reduction in milk production will not lead to diminished returns from the sector: if we cut back the quantity supplied, we would move up the demand curve, getting a better price from fewer resources committed to the dairy sector – called ‘improved terms of trade’ (Infometrics, pp 4, 9; Sense Partners, page ii).

“Overall it is my prediction that we will be significantly better off economically from the implementation of the policy scenarios – even before factoring in the environmental benefits that these policies are purposed to achieve,” Professor Hazledine concluded.

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