The Importance of Exports in New Zealand’s Money Circulation Economy

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OPINION: A traveling salesman, feeling happy, goes to the local hotel and gives the hotelier $ 50 to reserve a room for the night. The hotelier, who also suspects the seller’s luck, brings the money to the corner shop and pays out his “on tick” account.

The shopkeeper who wants to share the good fortune brings the money to the local mechanic and pays his last trip bill. The mechanic brings the money to the local hostess and pays the last help. The hostess is always lucky and takes the money to the local hotel, where she hands over $ 50 to reserve a room for the night …

Who but the tax officer is out of pocket?

This is the essence of the money round. Every dollar circulates. Savings and taxes reduce them at every stage, and leakage occurs, but $ 1 is worth more than $ 1 in communities. How much more is there much discussion and teaching among economists. Perhaps the descriptor should be “sales” rather than the more commonly used “multiplier”. Every dollar that comes into the country through export payments to dairies is converted about eight times in the community, and every sheep and beef dollar six or seven times (according to bank estimates).

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Exports bring new money to New Zealand. Money that is already here “seeps” out of the traffic, for example into apartments or other purchases from abroad. The money paid for housing construction in New Zealand supports the employment of real estate agents who then support employment in other sectors. Money paid for goods supports shop and supermarket employment and transportation. Money paid online for goods from overseas suppliers only supports the New Zealand transportation workers. The other money leaked offshore.

During Covid, the government has made huge investments in wage support and higher social benefits to ensure people can continue to shop – the massive “spending package” should offset the potential economic impact of Covid by giving people income. It worked: the New Zealand economy didn’t collapse as predicted. A large part of this was due to the fact that export revenues from the primary sector continued. And the money was turned over.

The rise in milk prices and meat prices show that New Zealand has what other countries want - protein.

DOUG FIELD / STATE

The rise in milk prices and meat prices show that New Zealand has what other countries want – protein.

Predicting a milk price between $ 7.25 and $ 8.75 per kilogram of milk solids, Fonterra indicated that Fonterra will add more than $ 12 billion to the New Zealand economy with $ 8 in the next season.

Fonterra sets the standard for what most other companies pay off; Tatua is in the specialty products market and generally pays a little more than the other companies. Overall, this means that, according to the Ministry of Basic Industries, the situation and outlook for 2022 of over 20 billion US dollars in milk exports will likely be realized in June. Meat and wool are projected to cost over $ 10 billion, horticulture and agriculture are expected to cost over $ 8 billion, and forestry is expected to cost over $ 6 billion. Another $ 3 billion is forecast for honey, live exports, and various processed foods and seafood, contributing $ 1.7 billion.

These revenues support economic development, especially in the regions.

The New Zealand Institute of Economic Research (NZIER) calculated in 2018 that the dairy industry plays a crucial role in supporting regional economic development. It offers jobs where there are few alternatives and is the main income generator in Waikato, West Coast and Southland. In half of New Zealand’s 15 regions, the agricultural side of the dairy is the leading GDP supplier and among the top 10 employers. It also contributes to job growth in agriculture and processing. And innovation. NZIER anticipates a 21 percent increase in cow productivity since 2001 and is winning on the processing side with the advent of UHT, baby food and fast-processing mozzarella in recent decades. “Fonterra’s food service business is growing three times as fast as worldwide. Every year, over 50 percent of the 300 million pizzas sold in China are topped with Fonterra’s cheese. “

Money, employment and innovation … the latter leads to productivity gains for the sector and the country.

New Zealand no longer has a reliable international student market. It no longer has any significant international tourism.

Most people agree that we have not yet seen the full effects of the Covid-19 disruption, but that the New Zealand economy has so far managed to move on. The export earnings are the reason – to make up for the money leaks. Taking out government loans to secure income was certainly part of the success, but that money will have to be reclaimed in the future – perhaps through inflation.

When that happens, we will again need the primary sector to collect the dollars from abroad so that the money can keep flowing.

The rise in milk prices and meat prices show that New Zealand has what other countries want – protein.

New Zealand is the happy country and everyone in the community can feel happy with the money running around.

Dr. Jacqueline Rowarth is an associate professor at Lincoln University and a farmer-elected director on the boards of DairyNZ and Ravensdown. The analysis and conclusions above are their own.

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