by Nick Clark, National Manager General Policy
Farm sales slip but still stronger than a year ago
The Real Estate Institute of New Zealand’s latest Rural Property Statistics have shown there were 395 farm sales in the three months ended March 2022. This was down 11.4% on the three months to February 2022 and also down 10.6% on the same three month period last year.
For the full year to March 2022 1,781 farms were sold, up 0.4% on those sold in the year to March 2021. Dairy farms were up 37.3%, and Arable farms up 3.2%, but there were declines for Dairy Support (down 24.4%), Grazing farms (down 4.6%), and Finishing farms (down 0.2%).
The median price per hectare for all farms sold in the three months to March 2022 was $29,795, down 0.8% on the three months to February 2022, but up 15.0% compared to three months ended March 2021.
The REINZ All Farm Price Index, which adjusts for differences in farm size, location, and farming type, increased 4.8% in the three months to March 2022 compared to the three months to February 2022, while it was up 30.7% compared to the three months ending March 2021.
Parker talks tax
Revenue Minister David Parker used a speech this week to “shine a light on unfairness in our tax system”. This follows National and ACT’s attacks on taxes reducing people’s incomes and adding to cost of living worries.
While not making any policy announcements, least of all for any new taxes, he did signal a wish for general taxation principles to be enshrined into legislation with reporting against those principles, for example on the progressivity of the tax system. While this idea might have some merit, much would depend on what principles are chosen.
Mr Parker also said he wants to go after high wealth individuals to ensure they’re paying their fair share of tax. He said there’s evidence that the wealthy pay lower effective tax rates than middle-income earners, but he couldn’t say by how much lower. “Currently, it really is a stab in the dark” to use his words.
It’s unclear how Mr Parker would make wealthy people pay more given the Prime Minister has previously ruled out capital gains taxes and other wealth taxes, but his speech might be a test run to see whether the public and political appetite on tax reform has changed since the last election.
Hoggard talks spending
Having a well-functioning tax system is crucial for funding the Government’s spending. The current broad-based, low-rate tax system does very well in this respect. It raises a lot of money relatively efficiently and cleanly, especially by global standards. Tinkering with it could be counterproductive.
But what is done with that spending is just as important, if not more so, than simply how it’s raised. So, while politicians muse about tax, Federated Farmers’ National President Andrew Hoggard has this week written about spending and how he’d like the Government in next month’s Budget to focus on value for money and fiscal responsibility rather than an orgy of new or higher spending. Read it here.
Dairy drives export growth
A big surge dairy exports on the back of higher international prices was the biggest contributor to export growth in March, according to Statistics NZ’s monthly Overseas Merchandise Trade statistics.
Goods exports were worth $6.67 billion in March 2022, up 17.2% from March 2021. For the key primary sector export commodities:
- Milk powder, butter, and cheese: up 29.7% to $2.01 billion.
- Meat and edible offal: up 11.2% to $1.03 billion.
- Logs, wood, and wood articles: up 2.5% to $526 million.
- Fruit: down 14.0% to $272 million.
- Preparations of milk, cereals, flour, and starch: down 16.7% to $151 million.
- Wine: up 2.4% to $156 million.
- Casein and caseinates: up 79.3% to $172 million.
In addition, live animal exports were up 17.9% to $64 million and eggs, honey, and other animal products up 20.8% to $56 million. However, vegetables exports were down 36.2% to $58 million and wool down 14.7% to $33 million.
Goods imports continued their strong growth, up 24.9% to $7.06 billion. Many commodities had double digit percentage increases, including those influenced by recent commodity price surges. For example, imports of petroleum and products were up 31.8% to $624 million and fertiliser imports up 88.0% to $105 million.
The goods trade balance in March 2022 was a deficit of $392 million, compared with a $41 million surplus in March 2021. Surpluses are typical in March months and over the past decade only one year (2018) has had a March deficit.
On an annual basis, for the year to March 2022, goods exports were $65.58 billion, up 11.2% on the previous year. For the key primary sector export commodities:
- Milk powder, butter, and cheese: up 15.4% to $17.88 billion.
- Meat and edible offal: up 15.5% to $9.13 billion.
- Logs, wood, and wood articles: up 13.2% to $5.41 billion.
- Fruit: down 2.3% to $3.85 billion.
- Preparations of milk, cereals, flour, and starch: down 13.2% to $2.03 billion.
- Wine: down 2.0% to $1.98 billion.
- Casein and caseinates: up 41.6% to $1.42 billion.
In addition, live animal exports were up 26.9% to $547 million and wool up 22.4% to $438 million. However, exports of eggs, honey, and other animal products were down 9.4% to $493 million and vegetables down 7.7% to $451 million.
Annual growth in goods imports was huge, up 30.4% to $74.69 billion. There were particularly big increases for the biggest commodities like vehicles, parts, and accessories (up 53.2% to $10.45 billion); mechanical machinery and equipment (up 29.4% to $10.41 billion); electrical machinery and equipment (up 18.0% to $6.50 billion); and petroleum and products (up 62.4% to $6.31 billion). In addition, fertiliser imports were up 65.5% to $1.24 billion.
The annual goods trade balance for the year to March 2022 was a deficit of $9.11 billion, a massive turnaround from a $1.70 billion surplus for the previous year.
Confidence lacking
ANZ’s latest Business Outlook Survey show firms remaining deeply pessimistic about the economy as inflation bites.
The April 2022 survey results showed a net 42.0% of businesses expecting general economic conditions to worsen over the coming year, unchanged from March. Agriculture was by far the gloomiest sector, with a net 71.4% expecting conditions to worsen, also unchanged.
Businesses were feeling better about their own activity, with a net 8.0% expecting it to increase over the coming year, up 4.7 points from March. In contrast to their views on the economy, agricultural respondents were relatively positive with a net 19.0% expecting activity to increase, up 9.5 points.
Cost pressures remain acute with an almost unchanged net 95.5% expecting costs to increase over the coming year (100.0% for agriculture) and a net 76.7% expecting to increase their prices, only a little lower than March’s net 80.5%. Agriculture’s pricing intention was well below the overall result at a net 42.1% befitting the ‘price taker’ (as opposed to ‘price maker’) nature of farming.
Respondents expected inflation of 5.92% for the coming year, up from 5.51% in March. Agricultural respondents expected a rate of 6.16%, the highest of the sectors (and up from 5.72%).
Jobs down in March
Statistics NZ’s Monthly Employment Indicators has shown a drop in jobs in March, including for the primary industries.
The number of seasonally-adjusted filled jobs in March 2022 was 2,284,100, down a 3,300 (or 0.1%) compared to February 2022. Primary sector filled jobs were down 350 to 104,800.
On an annual basis, comparing actual (i.e., unadjusted) jobs in March 2022 with March 2021, there were more than 64,000 more jobs (up 2.9%) to 2,290,000. However, primary sector filled jobs were down 3,200 (or 2.9%) for the year to 106,700, probably more a reflection of acute labour shortages than any loss of employment opportunity or demand for workers.
The biggest industry increases in filled jobs were for professional, scientific, and technical services (up 14,500); construction (up 13,200); health care and social assistance (up 10,100); retail trade (up 7,600); and public administration and safety (up 6,700).
Farm pay up – take note Kiwis
Farm remuneration packages have increased strongly over the past two years, according to the 2022 Federated Farmers-Rabobank Remuneration Report released this week.
The report shows that since the previous 2020 survey the weighted average total package across farming sectors was up 13% to $67,018. In the dairy sector’s was up 15% to $67,251, sheep and beef’s up 14% to $66,859, and arable’s up 7% to $68,618.
The report also shows that across the sector, average reported hours worked fall below the International Labour Organisation recommended maximum standard working time of 48 hours per week (for full-timers – dairy 47.2 hours, sheep/beef 44.8, arable 46.2).
We hope that people see from this that agriculture is a sector which is becoming increasingly attractive for workers and will help change perceptions. Acute labour shortages in our industry are a big problem and attracting more people into farming is desperately needed.
Next week.
Next week’s big economic news will be Statistics NZ’s March quarter Labour Market Statistics. Unemployment was only 3.2% in the December quarter and it will be interesting to see if it goes any lower. If so, it would be uncharted territory. It will also be interesting to see whether labour market tightness is reflected in a pickup in growth for wages and salaries.
NIWA Soil Moisture Data.
NIWA’s latest soil moisture maps (as at 9am Thursday 28 April) show soils significantly drier than usual for this time of year in the Waikato, while most eastern areas of the North Island continue to be wetter than usual. In the South Island there are a number of areas where soils are drier than usual, but Southland, which has had drought conditions for months, has seen an easing. But with winter upon us it has come a bit late unfortunately.
Exchange Rates
The NZ Dollar was weaker with it down 1.6% for the week against the Trade Weighted Index. Although down overall, it was a bit mixed against our key trading partners – down sharply against the US Dollar and the Yen, also down (although by less) against the Euro and Renminbi, but up against both the Australian Dollar and the UK Pound.
Source: Reserve Bank of NZ
Wholesale Interest Rates
Over the course of the week, the yield for the 90 Day Bank Bill was up another 5 points to 1.99% and the 10 year Government Bond yield was up 25 points to 3.71%.
The Reserve Bank will next review monetary policy settings (including the OCR) on 25 May 2022. Market pricing suggests it will be another 50 pointer.
| This Week (28/4/22) | Last Week (21/4/22) | Last Month (28/3/22) | Last Year (28/4/21) | |
| OCR | 1.50% | 1.50% | 1.00% | 0.25% |
| 90 Day Bank Bill | 1.99% | 1.94% | 1.60% | 0.35% |
| 10 Year Government Bond | 3.71% | 3.46% | 3.38% | 1.63% |
Source: Reserve Bank of NZ