11 May 2024

While the government concentrates on implementing its legislative programme within New Zealand’s short three-year electoral cycle, it is timely to consider longer-term policy issues that outlast any normal span of government.

As part of its programme of strategic policy reviews, The Helen Clark Foundation teamed up with the New Zealand Institute of Economic Research (NZIER) to consider key challenges facing the country:

• Demography. An ageing population means greater demand on health and superannuation, yet the taxation base in the working population is due to decline.
• Environment. New Zealand is operating outside sustainable planetary and environmental boundaries, yet it must draw on these resources for its primary sector economy.
• Economy. While different metrics could be used, a key one is we have the lowest export intensity – 27% of GDP – compared to the 60% average of 24 small OECD countries.

We considered, like the Productivity Commission (2023), that the primary sector was a good place to start on these challenges – because of its major export and overall economic significance, but also because of the potential for greater value capture in this sector.

We spoke to industry leaders, and drew on several case-studies to distil possible lessons of export success and value capture:

• Kiwifruit (Zespri). Cross-sector coordination, international linkages, constant innovation.
• Honey (Comvita). Exploiting a unique local product and developing a distinctive market.
• Timber (Red Stag). Drawing on policy and incentives to diverge from predominant raw exports.
• Wool (Icebreaker). Exploiting and branding a unique mixture of local product and lifestyle.
• Beef and Lamb (Taste Pure Nature). Consumer focus, investment, government backing.
• Fish. We took Iceland as a comparator: they halved fish take, but doubled value by cross-sector cost-sharing and complete use of the catch.
• Milk (A2 Company). Research and innovation breakthrough, long-term commercial development.

In working across these case studies and interviewing industry leaders, several themes emerged. In many of these cases, research and innovation were key, either in an initial breakthrough – such as A2 milk and Manuka honey – or through constant product development (as with Zespri). However, in almost all cases a sophisticated focus on the consumer and on marketing dynamics was required, particularly where a distinctive New Zealand story could be told (for example, Taste Pure Nature and Icebreaker). In many instances cross-sector collaboration and government involvement were required, such as for Red Stag and for the Iceland fishery. Finally, it is important to note the catalytic role of entrepreneurialism, the necessity of sound management and governance, and sufficient skill levels in the workforce.

To complement the important focus of the report on local informants and a predominantly domestic audience, Paul Polman, former CEO of the giant consumer products multinational, Unilever, beamed into a moderated conversation at the launch of this report.

His message in reference to the issues of climate change, biodiversity, and planetary boundaries, and their impact on primary sector industries, was that “the train is leaving the station” and that New Zealand needs to get on board; there are international treaties being drawn up (oceans, biodiversity, climate change), a growing list of major companies are signing up for the agenda, and countries are making new regulatory arrangements, such as the border-adjustment levies of the EU.

This is quite aside from the shift in consumer sentiment. In many respects, as one participant in the discussion suggested, “the consumer is the new regulator”. Yes, pesky agencies may be drawing up what look like restrictive regulations, but in the end the international consumer will be the judge of whether a country like New Zealand is meeting contemporary sentiments on “nature positive” products.

Paul Polman argued, explicitly drawing on the Māori proverb He Waka Eke Noa (we are all in this together), that New Zealand has a good and distinctive “nature positive” story to tell, but it needs to be true, substantive, repeated, and unified if it is to have integrity and yield sustained benefit.

As a small country we are disadvantaged to a degree, but it might also make it easier for us to unite and collaborate on such an agenda. As a distant country we are also disadvantaged, but we need to focus more on “disintermediation”; that is, reducing the number of transactions in the value chain to ensure a clear run between producer and consumer, with more value coming to New Zealand and the producer community.

Indeed, Paul Polman added that producers – for example, farmers – need to be at the centre of this agenda, and that a very decent proportion of this value capture needs to find its way to them. Europe and other countries have suffered from producer opposition to eco-friendly regulation; producers need to be part of the conversation and the solution.

 If we continue to be over-reliant on mass volume, low-value commodity exports, together with an export intensity that is the lowest among OECD countries of comparable size, then our way of life and social infrastructure may well fray and decline as we become increasingly reliant on the import of foreign capital to make up for our deficits in savings, innovation, collaboration, and export value capture.

This report has been compiled to stimulate a serious conversation about our future.

Peter Davis, Chair, The Helen Clark Foundation, an independent, non-partisan public policy think tank.

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