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Industrial Structure and Principal Economic Sectors

Primary Industries

The agricultural, horticultural, forestry, mining and fishing industries play a fundamentally important role in New Zealand's economy, particularly in the export sector and in employment. Overall, the primary sector accounts for 7.6% of GDP and contributes over 50% of New Zealand's total export earnings.

Agriculture and Horticulture

Agriculture directly accounts for around 5.0% of GDP, while the processing of primary food products accounts for a further 2.8%. Downstream activities, including transportation, rural financing and retailing related to agricultural production, also make important contributions to GDP.

Recent fluctuations in commodity (particularly dairy) prices have highlighted the importance that agriculture plays in the New Zealand economy. Rising demand from developing countries and supply constraints helped push dairy prices to their highest ever level in both world and New Zealand-dollar terms in late 2007. As a result, primary sector incomes were boosted, which, in turn, lifted spending and investment, spilling over to the wider economy.

Prices for New Zealand's key export commodities turned down in mid-2008, gathering momentum as the financial crisis intensified and placing pressure on already soft domestic demand. However, commodity prices recovered strongly during 2009 and over the second half of 2010 and first half of 2011 as global growth and demand returned. New Zealand's major dairy exporter, Fonterra, was able to increase forecast payouts to farmers on the expectations of sustained high prices. Over the second half of 2011, commodity prices came off their highs as renewed euro area concerns emerged, leading to demand worries. In late 2011, Fonterra lowered forecast payouts due to the lower world prices and relatively high New Zealand dollar. Nevertheless, commodity prices for New Zealand's key exports remain at near-historical highs.

Horticultural products have become increasingly important, with the principal crops being wine and kiwifruit. Other significant export products include apples and pears, fresh and processed vegetables, and seeds.

Table 8 shows sales of the principal categories of agricultural products for the years indicated and as a percentage of agricultural sales for 2011.

Table 8 - Gross Agricultural Production[1]
Year ended 31 March 2008 2009 2010 2011 2011
(dollar amounts in millions) % of Total
Dairy 10,140 6,384 7,904 9,515 39.1
Agricultural services 2,974 3,752 3,864 4,087 16.8
Cattle 1,709 2,049 1,842 2,125 8.7
Sheepmeat 1,667 2,136 2,134 2,044 8.4
Fruit 1,750 2,117 1,942 1,913 7.9
Vegetables 963 918 985 1,063 4.4
Sales of live animals 735 735 806 851 3.5
Crops and seeds 510 698 619 639 2.6
Wool 480 402 448 560 2.3
Non-farm income 325 407 403 448 1.8
Other horticulture 274 246 224 241 1.0
Other farming 253 216 217 229 0.9
Deer 258 280 218 222 0.9
Poultry/eggs 163 178 204 213 0.9
Pigs 160 180 171 154 0.6
Value of livestock change 154 29 70 10 0.0
Total Gross Revenue 22,515 20,729 22,052 24,315 100.0
 
  • [1] All data estimated

Source: Ministry of Agriculture & Forestry

Forestry

Forestry and logging makes up around 1.3% of GDP and is the basis of an important export industry, with almost 70% of wood from the planted production forests eventually being exported in a variety of forms, including logs, wood chips, sawn timber, panel products, pulp and paper, and further manufactured wooden products, including wooden furniture.

For the year ended September 2011, the value of exports of forestry products was $4.6 billion, 10.1% of New Zealand's total merchandise exports. China and Korea were the largest markets for log exports at $1,077 million and $307 million respectively, while India and Japan continue to be important destinations for the export of sawn timber.

New Zealand's climate and soils are well-suited to the growth of planted production forests. These forests cover an area of 1.8 million hectares and produce over 99% of the country's wood. Radiata pine, which makes up 90% of the plantation estate, matures in 25 to 30 years, more than twice as fast as in its natural habitat of California. This species has had considerable research investment and has demonstrated its versatility for a wide range of uses. The second most important species is Douglas fir, which makes up 6% of the planted forest area.

New Zealand's total planted forest growing stock at 1 April 2008 was estimated at 446 million cubic metres. For the year ended September 2011, an estimated 26.1 million cubic metres of wood were harvested from production forests, an increase of 11.4% from a year earlier. Of this, 12.8 million cubic metres were exported as logs and the balance was manufactured into a range of products, including 3.8 million cubic metres of sawn timber, 1.9 million cubic metres of wood panels (consisting of fibreboard, veneer, plywood and particleboard) and 1.6 million tonnes of wood pulp (made from harvested logs plus residues from sawmills).

An estimated 26.1 million cubic metres of wood was harvested in the year to September 2011. Forecasts suggest availability could increase to 35 million cubic meters annually in the early 2020s. Market conditions and logistical constraints (availability of logging crews, transport capacity, and wood processing capacity) will dictate how quickly the additional wood is harvested.

Total forestry export revenues increased 13.9% in the year to September 2011, driven by a large 41.9% increase in log export earnings. The main market responsible for the increase was China, with log exports there rising 58.1% in the year to September 2011.

Fishing

New Zealand has an Exclusive Economic Zone (EEZ) of 3.1 million nautical square kilometres supporting a wide variety of inshore fish, some large deep-water fin fish, squid and tuna. New Zealand's unpolluted coastal waters are also well-suited to aquaculture. The main species farmed are Pacific oyster, green-lipped mussels and quinnat salmon.

Fishing is a major New Zealand industry and an important merchandise export earner. Fish and other seafood accounted for $1.53 billion in export revenues in the year ended September 2011, a 5.75% increase from the previous year.

The most important export species are green-lipped mussels, hoki, mackerel, squid and tuna. Smaller volume but high value exports are rock lobster, abalone and orange roughy. The main export markets are Hong Kong, Australia, the United States and Japan.

The conservation and management of the fisheries is based on a quota management system designed to protect the future sustainability of the fisheries while facilitating their optimum economic use. The system uses markets, together with scientific assessments of fish stocks, to allocate fishing rights without arbitrarily restricting fishing methods.

Energy and Minerals

New Zealand has significant natural energy resources, with good reserves of coal, natural gas and oil/condensate, extensive geothermal fields, and a geography and climate which have supported substantial hydro-electric development. The main minerals mined, in addition to coal, are gold, silver, ironsands, various industrial minerals and gravel for construction.

Programmes for the exploitation of New Zealand's energy resources were accelerated after the first oil shock in 1973. Oil and gas exploration was increased and energy conservation programmes were developed and promoted. As a result, New Zealand is able to meet a significant proportion of its overall energy requirements. More recently there has been a renewed interest in the development of energy and mineral resources to contribute to economic growth, including the issuance of new licences for the exploration of significant offshore oil prospects.

Natural Gas: Natural gas is currently produced from 20 fields and wells in the Taranaki region of the North Island, with production dominated by the inshore Pohokura oil and gas field, the long-standing offshore Maui field and smaller onshore fields. There are three main uses for gas in New Zealand: electricity generation, petrochemical production and fuel for industrial and domestic purposes.

Gross natural gas production was 186 petajoules in the year to June 2011. Natural gas production had declined sharply after the Maui field peaked in 2001, before stabilising through to early 2007. Production has since increased with the continued development of new smaller and more diverse fields and the introduction of the Pohokura field in 2006. The offshore Kupe oil and gas field, which was brought into production in 2009, has been a significant contributor.

Oil: New Zealand's crude oil production was 105.5 petajoules in the year to June 2011 (around triple that produced in 2006), of which 95% was exported. New Zealand exports light crudes, while importing heavier crudes suited to its refining plant at Marsden Point. While New Zealand is still a net importer of oil, crude oil exports are becoming increasingly important with the value of petroleum exports accounting for 4.9% of total exports in the year to September 2011.

Crude petroleum production has been increasing since the second half of 2006 when the Pohokara field commenced production. The Tui Area Oil Fields, located in the offshore Taranaki basin, commenced commercial production in the middle of 2007 and produced 32.5% of New Zealand's oil in the 2009 year. New Zealand's production of crude oil was further boosted in late 2008 as Maari, a new field also located off the Taranaki coast, started production. The Maari field reached full production in June 2009, around the same time that production from the Tui fields began to decline.

Coal: Coal is New Zealand's most abundant energy resource with total in-ground resources estimated at about 15 billion tonnes. Of this, 8.6 billion tonnes is judged to be economically recoverable from 42 coalfields. Of this amount, 80% is relatively low-grade lignite, 15% is middle-grade sub-bituminous, and the remaining 5% is bituminous. Lignite is used mainly for industrial fuel and sub-bituminous coal for industrial fuel, steel manufacture, electricity generation and domestic heating. Bituminous coal, which is typically very low ash, low sulphur coking coal, is mainly exported for metallurgical applications.

In 2010, total coal production was 5.3 million tonnes, a 17% increase over 2009, as international demand returned after the Global Financial Crisis. Over 59% of national production is from two large opencast operations, at Rotowaro and Stockton on the West Coast of the South Island, owned by the State-Owned Enterprise (SOE), Solid Energy.

Electricity: Power from renewable resources (hydro and wind generation) accounted for around 70% of total energy production with thermal and geothermal making up the remainder.

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