Dairy’s labour crisis
John Key keeps telling us that tax cuts are the only way to stem the flow of Kiwis over to Oz. Call me a sceptic, but several reports over the last month paint a very different picture of why Kiwis are jumping the ditch.
It seems a healthy chunk of young dairy talent are part of the exodus. The reason?
“The farms are so much cheaper and bigger over here and there is potential to milk more cows and to do more production,” says Michael, as he toys with a coffee cup bearing the name of a popular New Zealand genetics company. “The same size farm we had in New Zealand had 210 cows and we are milking 320 here and double the production. You get a lot higher production per cow over here.”
Unlike Fonterra-dominant New Zealand, they are spoilt for choice as to which milk company they might deliver their milk to — Murray Goulburn, Parmalat or Fonterra, among others, and three or four cheese factories. On top of this competition, farmers are not penalised by high-priced Fonterra shares for supplying milk.
The Dom Post reports that there are 3000 dairy jobs going, but no one to fill them, so recruiters are going overseas to places like the Phillipines to fill the labour gap.
Part 2 of The Press’ coverage reinforces that low capital costs are the driving factor in young (and old) Kiwi farmers making the move across the ditch. It seems you just cannot afford to buy in NZ. They find the same great returns on their milk solids, a more competitive market and cheaper land prices.
No matter how you cut it, a tax cut is not going to fix this exodus. I suspect that the same pressures are inspiring other Kiwis to make the move, except that it is house prices rather than farm prices. The news has been littered this week with stories of how expensive housing is in NZ. The Nats want to blame the government rather than the market, but offer absolutely no solutions of their own to fix the problem. This is probably because they would have to admit to some kind of market failure or some kind of government intervention, both of which would undermine their ideology and their attack on the government. The Federated Farmers are calling for a relaxation of immigration rules to allow more foreign dairy workers in, but that would grate against a favourite election year boogeyman, immigration.
The Nats inconsistent policy has them tied in knots, while one of their key constituents heads into crisis.
January 23rd, 2008 at 1:39 pm
gee, i don’t know, they could just raise wages?
January 23rd, 2008 at 2:50 pm
or redistribute the wealth from the high income earners to the low by increased taxation for those who have and give handouts to those who have not.
Any idea yet frog on what the gap should be between high and low income earners as asked in a previous comment?
Suggest the answers to many of those taxation questions might be better answered when you set a KPI on what the gap should be.
“but offer absolutely no sloutions (your sp) of their own to fix the problem”
and the Greens solution is? More taxation on “bad” activity and less on “good”.
Now define good and bad and you will I suspect and up with about 2 million different varaiations.
Bit like how do you measure New Zealands well being outside measuring GDP. GDP is a physical transaction and can be defined and thus measured.
To measure wellbeing you must first define it. Again you will get about 2 million variations on that theme.
No, drop GST and you will get a far more exuitable tax systrem.
January 23rd, 2008 at 3:25 pm
> The news has been littered this week with stories of how
> expensive housing is in NZ
And usually taking the story’s originator (the pro-sprawl lobby group Demographia) at face value, quoting their opinion that the only viable option is to free up more land to property developers.
The Herald has this to say:
House prices have risen because they are not unaffordable for everyone. The market has been driven by investors in rental properties, who have put their money there because of tax deductions and tax-free gains. Such incentives are not available in other forms of investment or saving. If, at the very least, property was placed on the same tax footing, the demand for it would diminish.
January 23rd, 2008 at 4:03 pm
We have worked on dairy farms, off and on, for over 30 years.
There have been massive changes in dairy farming in that time. A predominant feature now are the mega farms, running 1,000 to 2,000 plus cow herds, whereas when we started, a ‘large’ herd was 300 cows. These mega farms are generally structured quite differently to the traditional old, small, father to son farm, or to an aspiring sharemilker.
A mega farm needs a team of workers, semi managers, managers and quite often a group of owners. Smaller farms, less common now, may no longer have the tried and trusted earlier sharemilking agreements instead a contract with variable pay and conditions.
I do not know why farmworkers are interested in Australia. Yes, if they aspire to ownership then land in NZ is very expensive.
I do not believe that there is one quick fix e.g. wages, to attract and retain NZ workers on NZ farms. In our experience that reasons for non-retention of farm workers are many.
January 23rd, 2008 at 8:33 pm
Gerrit, the Greens proposed eco-taxes are not about wellness. They are about taxing
* diesel
* landfill
* hazardous substances and pesticides
* other forms of pollution or energy
I’m sure you agree that those are quantifiable rather than airy fairy.
You raise a valid point about who decides what is good and bad. The eco-tax reform policy proposes an Ecological Tax Reform Commission which would develop a strategy for further ecological tax reforms, considering all existing taxes and possible new eco-taxes as well as considering ways to make the tax and income support systems work together better.
January 23rd, 2008 at 8:39 pm
on the subject of farm sizes, there is an interesting article on the Oil Drum about how high oil prices actually encourages the trend towards large-scale industrial agriculture rather than, as generally expressed in peak oil literature, a trend towards small-scale labour intensive smallholdings.
http://www.theoildrum.com/node/3481
I agree with some of the comments to that article that the study is flawed because it looks at trends under normal economic conditions and assumes that the trends will still hold under the abnormal economic conditions that peak oil will bring.
January 23rd, 2008 at 10:06 pm
Stuey,
wellness of the planet and the people living on it, no?
Be interesting for the greens to publish a budget based on increased eco taxes and a reduction in other taxes.
Will they publish one?
Until we see what that budget will look like, as I just cant see anyone voting for an increase in eco taxes and a reduction in other taxes without some concrete figures.
One suspect if cullen is around in December there will be eco taxes as a sop to the Greens but sweet all in cutting other taxes.
January 23rd, 2008 at 10:50 pm
do any other parties publish detailed proposed budgets in advance of an election? I think you’ll find they don’t. So why should the Greens be the only party that has to do accounting of their tax policies before they are seen as a sensible party deserving of a vote? I still maintain that our policies are more in depth and have more detail than any other party.
http://www.greens.org.nz/docs/policy/
http://www.greens.org.nz/election2005/policies.asp
Care to prove me wrong?
January 23rd, 2008 at 11:46 pm
Frog,
You write: “I suspect that the same pressures are inspiring other Kiwis to make the move, except that it is house prices rather than farm prices.”
The house prices in Australian cities are just as unaffordable as in New Zealand (if not slightly more unaffordable), so this can’t be a reason for emigration to Australia. I think it is probably simply an issue of wages for comparable jobs being higher.
You also quote in the first part of your article: “The same size farm we had in New Zealand had 210 cows and we are milking 320 here and double the production. You get a lot higher production per cow over here.”
Do you know why Australian dairy farms get higher production than New Zealand ones? (I don’t know why). Are there some environmental issues here? For example, how can a dairy farm in the driest continent be more productive than one in New Zealand? What are Australian dairy farmers doing which New Zealand farmers aren’t, and is it sustainable? I’m just curious.
January 23rd, 2008 at 11:48 pm
Stuey, you write:
“do any other parties publish detailed proposed budgets in advance of an election? I think you’ll find they don’t. So why should the Greens be the only party that has to do accounting of their tax policies before they are seen as a sensible party deserving of a vote?”
I actually think detailed budgeting and an accounting of tax policies would be a vote winner. Of course there would be quite a lot of uncertainty, but it might be worth a try?
January 24th, 2008 at 12:51 am
Yes, the proposed Eco-Taxes are all about the environment. They include:
* Overhaul of the benefits system [pg 52]
* Introduce a Universal Income or Guaranteed Minimum Income (UI/GMI) [pg 52]
* Introduce a comprehensive capital gains tax [pg 54]
* Tax capital movements in and out of New Zealand [pg 55]
* Restructuring the Govt Super fund to invest “in New Zealand” [brochure]
* Across the board tariffs on imports (+5 to 10% on all imports) [pg 56]
* An Arrival Levy to complement the current Departure Levy [pg 57]
* Increase in tax deductibility of donations to communities [pg 2]
The $15 a week tax offset doesn’t quite gel with the proposed new Eco taxables either. And given the inflation over the last few years, any such tax break offered next election would barely offset those rises and bracket creep before adjusting to new taxes.
Interesting ideas, but dangerous in some combinations, as as mentioned, not properly costed or even necessarily about the environment - which I think would complicate the acceptance of the overall proposal.
I think the Greens should look at simplifying their Eco-Tax package and at the same time expressing some environmental targets such taxes would achieve (I couldn’t see any meaningful statements in this area). A bolder approach might be to set a tax free threshold of say 15K and introducing a range of Eco-Taxes to balance this.
I think the boost to low income jobs would be much appreciated by a broader array of voters, if you can convince them you wont ban them from driving, and that Labour would entertain such an idea. (Strangely, you might find National more amenable if you also cut the business tax rate down to 25% to attract more investment).
I discuss my impressions on Eco-Tax here: Eco-Tax
January 24th, 2008 at 1:50 am
Taxing deisel is a curious thing for a green party to do. Unless the Greens actually are anti-car and thus can’t be bothered comparing the fuel economy of the Prius with any of the Euro deisel’s under typical New Zealand drivng conditions, ie 45% rural, 25% town and 30% city driving. The Prius would only use less fuel in city drivng with it’s high proportion of stop/start drivng where regenerative braking is a big plus. In country towns and on the open road the dominate operating mode is steady speed cruising. The deisel engine’s inherent superior fuel efficiency compared with petrol engines makes them a more sustainable mode of transport than a hybrid.
January 24th, 2008 at 2:01 am
samiuela, it is possible that the lack of reliable water for irrigating dairy farms in Australia has led to the sensible solution of only having dairy farms where there is reliable rainfall. Coastal Victoria and SA and parts of NT and Queensland might be suitable. As I understand it the dominate farming in Austalia is grain growing and sheep or beef. They are dependent on seasonal rainfall with some irrigation at key parts of the growing season. Without knowing where the two farms are located or how they compare with average or 85th percentile dairy farms in the two countries the comparison is really meaningless.
January 24th, 2008 at 2:04 am
The information you refer to in this post seems to contradict the information referred to in the post “Aussie supermarket duopoly comes under the spotlight”
Ant chance the media has spun both stories so much to empahasise the negatives that the truth has fallen through the cracks?
January 24th, 2008 at 3:06 am
Of course the fact that Fonterra retains a monopoly on the quota based dairy export market (around 40-50%) can’t help either - hardly market failure to find that a legislated monopoly wont perform as well as a competitive one. Also given Australia DOES have lower taxes (and soon to be lower) has to help as well.
Don’t forget Australia does have some agricultural subsidies, and many other subsidies to its rural sector for political reasons, which of course cost the rest of the economy.
Of course the argument about tax cuts is a bigger one - it’s about the role and size of the state. It’s hardly a surprise the Greens think the state should be bigger than what the National Party thinks.
January 24th, 2008 at 5:40 am
Stuey,
As samiuela says, publishing an alternative budget would be a vote winner. Because nobody else does it is no excuse for not doing it.
In fact I would make it compulsary for every party standing in the election to produce one. The incumbent government would open the books to the nation and each party would have to cost its policies versus projected revenue streams, spending reserves etc.
Now that would transparency for you.
So the greens could start a new trend by publishing a 2009 budget that included all the good and bad taxes they proposed and how that would affect the community.
Come on be different. Would love to see how the Greens would balance the books with the good and bad taxes.
Bearing in mind that as the bad taxes revenue stream diminishes (as desired) you are going to have to start taxing the good to pay for all those social programmes (now to include screening 3 year kids for anti social behaviour).
January 24th, 2008 at 9:50 am
well no offence but you didn’t exactly offer any of those reasons or the solutions so why dismiss wage rises? you may have been implying that more stable contracts for farm workers might help, but it’s all part of the same thing - employers won’t offer better contracts or better wages to attract the staff when they can cry to the government for more immigration instead.
that may keep workers in the country more, but overall population isn’t the problem - it’s more now than ever before. the problem is the unwillingness of employers to allow the price mechanism to match labour demand & supply in those industries with the most accute demand for labour - in other words their unwillingness to share the benefits of economic growth with those at the bottom of the pile. tax tinkering won’t shift workers from other industries to dairy - only wage adjustments (or improvements in other employement conditions) will do that.
in a mid ’90’s election (can’t remember the year sorry) labour’s budget plans came under attack from both national & the alliance as unaffordable without raising taxes. labour got their proposals independently analyzed & audited in detail to prove that they could do it.
it didn’t win them the election
January 24th, 2008 at 11:44 pm
Here’s one reason to leave (or not to feel so rosy about the old place):
“. Americans are not just visiting the country in numbers unimaginable only ï¬?ve years ago—they’re immigrating, drawn by an arcadian ideal (never underestimate the pacifying effect of several billion sheep), breathtakingly cheap waterfront real estate, see-through fish-tank architecture, and an investment climate that, as one Las Vegas resort owner–cum–South Island winemaker puts it, makes New Zealand “the Switzerland of the South Seas.”
One of the most powerful forces in the shilling of the nation is Helen Clark, familiar to all Kiwis as Madame Prime Minister. In her book, there are no bad tourists, only ones with shallow pockets. And in a recent campaign that will go down in history, Clark aggressively packaged and promoted New Zealand as a place where Californians in particular, because of their relative proximity and the kinship in lifestyles,might consider putting down roots. “Active recruitment,” she called it, and some of the state’s richest residents signed up. Vive le marketing.
http://www.travelandleisure.com/articles/kiwi-country/page/1/print
January 25th, 2008 at 1:12 am
There isn’t enough land yet we have the largest subdivision in the Southern Hemisphere (Pegasus Town). Maybe they have forgotten that they sell off shore?.
We may need to reclaim land from the ocean..