The 2023 General Election in New Zealand has resulted in a change of government, although the final seat allocation for each party remains uncertain until special votes are counted on 3 November.
Regardless of its final composition, the new government faces the immediate challenge of addressing critical issues in the agricultural sector to bolster dwindling confidence.
Economic Policies and Agriculture
Farmers have consistently prioritised the containment of government spending and debt reduction. In recent years, government expenditure has surged, leading to operating deficits and a rise in debt. Effective fiscal management is essential not only for the agricultural sector but also for the Reserve Bank’s monetary policy efforts.
Taxation Concerns
New Zealand’s ‘broad-base-low-rate’ tax system has been generally efficient, but recent shortfalls are attributed to excessive government spending. The farming community, like most businesses, seeks a lower and simpler tax burden.
It’s reassuring that all major parties have ruled out new taxes on water, livestock emissions, fertiliser, wealth, land, or capital gains.
Inflation and Debt
High inflation rates have escalated costs for farmers, affecting profitability. As of August 2023, the agricultural sector’s debt stood at $63 billion, meaning a one-percentage-point change in lending rates could have a $630 million financial impact.
Recent surveys indicate rising interest rates and declining satisfaction with banking relationships among farmers.
Regulatory Hurdles
Regulation and compliance continue to be significant concerns. Poor-quality regulations have the potential to reduce farm production, increase costs, and consume farmers’ time. An improvement in the quality of regulations is urgently needed.
Key Policy Recommendations
- Prudent fiscal policies that deliver operating surpluses and allow debt reduction.
- An independent Parliamentary Budget Office for better fiscal scrutiny.
- A simpler tax system with lower burdens on income and companies.
- An inquiry into rural banking and its impact on the agricultural sector.
- Regulatory reforms based on evidence, proportionate to risk, and minimising unintended consequences.
As New Zealand waits for its new government to take shape, the agricultural sector looks forward to policies that can restore confidence and stimulate both the sector and the broader economy.
