Story: Government and agriculture
Page 8 – Subsidies and changing markets, 1946–1983
Intensification in farming
In the immediate post-war years, Britain wanted as much food as New Zealand could export, so the government focused on maximising production.
Their agenda was to:
- develop poor-quality lands
- facilitate irrigation, especially in the South Island
- advise on developing hill country, especially promoting aerial topdressing.
The government remained actively involved in research, especially relating to animal productivity. Animal research stations had been set up at Ruakura and Wallaceville in 1939, after outbreaks of facial eczema. The Ruakura station gained a high profile, partly because it discovered the cause of facial eczema in the late 1950s, but mostly through its dairy research, farmer education programmes, and its charismatic director from 1943 to 1962, Campbell McMeekan. The Ruakura station was influential in the expansion of dairying in the Waikato from the 1940s to the 1960s.
The National government set up the Agricultural Production Council in the mid-1960s. The council lobbied for subsidised fertiliser, concessionary lending for land development, and special assistance for the development of marginal land. These subsidies reflected a very close relationship between successive governments and farmers. But the market for farm produce was changing rapidly. Agriculture was dominant in the export sector, but was declining as a percentage of gross domestic product. This decline might have been more rapid if governments had not supported farming.
Signs of trouble
In the late 1950s, European producers began to dump butter on the international market, undermining prices. New Zealand’s export agreement with the UK came under threat as Britain prepared to join the European Economic Community, which it did in 1973. Governments tried in the 1960s and early 1970s to maintain access to the UK market, and to encourage diversification of markets and produce. However, the Ministry of Agriculture found it difficult to move away from its role promoting wool, meat and dairy.
Types of subsidy
The government offered a number of farming subsidies in the late 1970s. The Livestock Incentive scheme (1977) encouraged farmers to carry more stock. Land Development Encouragement Loans (1978) made cheap loans available to develop unproductive land. The Supplementary Minimum Price scheme (1978) guaranteed farmers price stability for their products, despite declining international prices.
Government subsidisation increased in the 1970s to offset the government’s policy of maintaining a high currency exchange rate and the high prices farmers paid for materials as a result of import licensing and trade protection policies. From the late 1970s New Zealand faced low prices for its products and difficulty securing export markets. There was a stockpile of sheep meat. By the early 1980s, government support for agriculture was equivalent to 30% of the total output from farming.