by Nick Clark, National Manager General Policy
Farmers doing their bit on climate change
Statistics NZ’s 2021 Business Operations Survey has revealed the awareness farmers have on climate change and their actions to reduce emissions and adapt to its impacts. Both are greater than for businesses as a whole.
Businesses in the agriculture, forestry, and fishing industry are amongst the most aware of the potential impacts of climate change, with 61% saying they were ‘very aware’ compared to only 39% for all businesses. Meanwhile, 52% were ‘very aware’ of government policies and programmes to reduce emissions, again much more than the 27% for all businesses.
The main reason why agriculture, forestry, and fishing businesses took climate change related actions was because they had experienced its physical impacts, with 44% saying that was why they had acted, much higher than 17% for all businesses.
The main barriers stopping agriculture, forestry, and fishing businesses were a lack of information to support decision-making (20%), that it was simply too costly (30%), and that there was a lack of viable technology (25%) – all of these much higher than for businesses as a whole.
25% of agriculture, forestry, and fishing businesses plan to measure their emissions, the highest for all industries and much higher than the overall result (10%).
40% of agriculture, forestry, and fishing businesses have made investments to reduce emissions or adapt to impacts of climate change, a bit higher than 35% for businesses as a whole. Uncertainty around future policy direction (30%) and uncertainty about the future of the ETS (28%) were the biggest barriers to investment, and much higher than for businesses as a whole (13% and 10% respectively).
Turning to business priorities over the next five years agriculture, forestry, and fishing businesses had the highest percentage of respondents saying emissions reduction (15% versus 7% for businesses as a whole) and for those saying preparing for changes in the physical environment (25% compared to 7% for businesses as a whole).
In contrast only 16% prioritised business expansion (compared to 28% for businesses as a whole), perhaps indicating farmers facing limits on production. Also, only 14% prioritised maintaining or enhancing their reputation (compared to 28% for businesses as a whole). This perhaps indicates more pressing concerns of achieving actual emissions reduction and of adapting to the impacts of climate change.
These results show farmers are doing their bit and wanting to do more, much more so than businesses overall. But to achieve this they need more and better information, more cost effective options, including better technology, and they need certainty about climate change policies and ETS settings.
The survey samples businesses with six or more employees. Overall, there were 47,448 respondents, of which 3,882 were agriculture, forestry, and fishing businesses.
Farmers’ confidence down
Rabobank’s March quarter Rural Confidence Survey has shown farmer confidence slipping into negative territory.
24% of respondents expected conditions in the agricultural economy to improve over the next 12 months, down 4 points on the December quarter survey. 27% expected conditions to worsen, unchanged from December, while 46% expected no change, down 3 points.
Rabobank said strong demand, rising commodity prices and positive overseas markets were cited by farmers with an optimistic outlook, while a ‘host of issues’ – including government policy, rising input costs, labour shortages and the fallout from the Russia-Ukraine conflict – were concerning farmers with a negative outlook.
Business confidence a little better, but not for farmers
ANZ’s monthly Business Outlook Survey has shown a small improvement in business confidence but a further increase in cost and price pressures.
The March survey showed a net 41.9% of respondents expecting general economic conditions to worsen over the past 12 months, a 9.9 point improvement from February but still very dire. Agriculture was by far the most negative of sectors and it became even more negative, with a net 71.4% expecting conditions to worsen, a 4.7 point decline.
Turning to own activity, the better predictor for economic growth, a net 3.3% expect their activity to increase over the next 12 months, a 5.5 point improvement. For agriculture a net 9.5% expect their activity to increase, a 1.6 point decline.
Cost expectations got even more acute with a net 95.9% expecting costs to increase, up 3.9 points. For agriculture all respondents expected their costs to increase. This spilled over to pricing intentions, with a net 80.5% expecting to increase prices, up 6.4 points. For agriculture there is less ability to set higher prices so its expectations were lower at 57.9%, but still up 7.9 points.
Forward inflation expectations strengthened to 5.51% for all respondents (up from 5.29%), with agricultural respondents expecting inflation of 5.72% (down from 5.87%).
Ag debt falls further
Agricultural debt slipped again in February with dairy lending continuing to be squeezed lower.
The Reserve Bank’s monthly Sector Lending Statistics showed lending to agriculture totalling $61.51 billion in February 2022, down $398 million (or 0.6%) from January 2022 and down $820 million (or 1.3%) from February 2021.
Dairy again bore the brunt of the decline in lending, but horticulture was up strongly:
- Dairy cattle farming: $36.72 billion, down $381 million for the month and down $1.88 billion (or 4.9%) for the year.
- Sheep, beef cattle, and grains farming: $15.02 billion, down $83 million for the month and down $67 million (or 0.4%) for the year.
- Horticulture: $6.65 billion, up $91 million for the month and up $981 million (up 17.3%) for the year.
- Other agriculture on farm: $2.37 billion, down $30 million for the month but up $77 million (up 3.4%) for the year.
Dairy lending is now $5 billion lower than its peak of $41.70 billion in July 2018.
In contrast to agriculture’s continued year-on-year decline, annual growth in housing lending continued be strong but its growth rate slowed up 9.5%. Business lending growth picked up to 7.6%, while personal consumer lending dropped 6.7%.
Mixed picture for regions
Covid-19’s impact on regional economies has been shown in Statistics NZ’s annual Regional Gross Domestic Product for the year to March 2021.
The annual increase in nominal GDP for the whole country was 0.8%, which masks great volatility within the year. It is also unadjusted for inflation so the change in ‘real’ GDP would have been negative (the CPI was up 1.5% for the year to March 2021).
Most regions had nominal increases, with only two declining – Taranaki (down 5.8%) and Otago (down 2.2%). However, Wellington (up 0.2%) and Auckland (up 0.4%) barely grew which dragged the overall result down. The strongest growing regions were Marlborough (up 3.8%) and Tasman/Nelson (up 3.1%).
Stats NZ said that Taranaki’s GDP drop was driven by a decline for oil and gas production due to lower global energy prices and reduced operations, while Otago’s drop reflected its heavy dependence on tourism-related sectors like accommodation, hospitality, and transport.
Jobs drop in February
Statistics NZ’s Monthly Employment Indicators has shown a drop in jobs in February, including for the primary industries.
The number of seasonally-adjusted filled jobs in February 2022 was 2,288,400 million, down a 6,000 (or 0.3%) compared to January 2022. Primary sector filled jobs were down 2,400 to 103,000.
On an annual basis, comparing actual (i.e., unadjusted) jobs in February 2022 with February 2021, there were almost 75,000 more jobs (up 3.4%) to 2,286,500. However, primary sector filled jobs were down 4,500 for the year to 107,400.
The biggest industry increases in filled jobs were for professional, scientific, and technical services (up 14,200); construction (up 13,200); health care and social assistance (up 10,300); and public administration and safety (up 9,800).
Record house consents
Statistics NZ’s latest Building Consents Issued has shown a record number of houses consented in February and for the year to February 2022.
In February 2022 4,195 new homes were consented, up 30.7% on the same month last year, at a value of $1.64 billion, up 33.8%. This is a record high number of consents for a February month. Almost all the growth in consent volumes was for apartments and townhouses, with standalone houses stable.
For the year to February 2022, 49,773 homes were consented, another new annual record, and up 29.9% on the previous year. These home consents were for work to the value of $19.24 billion, up 30.7%.
The value of non-residential building consents was $716 million in February 2022, up 19.6% on February 2021. This included $25 million for farm buildings, up 46.1%. For the year to February 2022, non-residential consents were worth $8.27 billion, up 15.8% on the previous year. Farm buildings were worth $316 million, up 13.6%.
NIWA Soil Moisture Data
NIWA’s latest soil moisture maps (as at 9am Thursday 31 March) reflect a reversal of the usual east coast dry west coast wet climate. Soil conditions are significantly wetter than usual in Northland-Auckland, Bay of Plenty, Gisborne, Hawkes Bay, Manawatu-Wanganui, and Wairarapa, Marlborough Sounds, and much of North Canterbury. Meanwhile, soils are significantly drier than usual in the Hauraki Plains, the West Coast, much of Otago and all of Southland. The Government this week classified drought conditions in Southland and Clutha and Queenstown-Lakes districts as a medium-scale adverse event.
Exchange Rates
The NZ Dollar lost a little ground this week, down 0.2% against the Trade Weighted Index. It was up against the US Dollar, the Pound, and the Yen, but down against the Australian Dollar, the Euro, and the Renminbi.
Source: Reserve Bank of NZ
Wholesale Interest Rates
Over the course of the week, the yield for the 90 Day Bank Bill was up 4 points to 1.61% while the 10 year Government Bond yield was up 1 point to 3.27%.
The Reserve Bank will next review monetary policy settings (including the OCR) on 13 April 2022. Another increase is highly likely and it could be a 50 pointer.
| This Week (31/3/22) | Last Week (24/3/22) | Last Month (28/2/22) | Last Year (31/3/21) | |
| OCR | 1.00% | 1.00% | 1.00% | 0.25% |
| 90 Day Bank Bill | 1.16% | 1.57% | 1.26% | 0.35% |
| 10 Year Government Bond | 3.27% | 3.26% | 2.77% | 1.78% |