An Overview of New Zealand’s Economic and Environmental Sustainability in Agriculture: 40 Years Without Subsidies

Abstract

A range of liberalisation programmes were introduced in New Zealand in 1984 as part of an economy-wide reform. For the agriculture sector, reforms included the removal of price support for sheep and wool, and the removal of input subsidies, resulting in production shifts away from sheep and wool production towards dairying. The changing production patterns generated productivity gains and reduced environmental pressures, as erosion-prone hill country was taken out of sheep grazing and forested instead. Since that time, and unrelated to subsidies, these trends have slowed with relatively more intensive, but still pasture-based, dairying, causing environmental problems such as challenges in relation to the use of fertilisers and greenhouse gas emissions. This is the first paper that examines key economic and environmental indicators of New Zealand’s agricultural sector four decades after the reform. I conclude that while the agricultural sector in New Zealand shows resilience in responding to world markets and price volatility, low levels of public investment mean that agricultural productivity growth is constrained. While subsidy removal boosted economic resilience, persistent challenges in the use of soil resources, such as nutrient management practices, necessitate the need for balanced policy. The New Zealand story could help inform a broader discussion about future approaches to agricultural subsidies reform as it advances global discourse about sustainability in agriculture and free trade. The findings from this study will function as a useful reference tool for policymakers, along with researchers and industry stakeholders, who need to find the correct balance between economic growth and environmental stewardship through market-based agricultural sustainability models.