‘The times, they are a changing’

29 Jul 2020 ‘The times, they are a changing’ image

We pride ourselves in New Zealand as being innovators.  The New Zealand horticulture industry is no exception to this reputation for innovation, with growers developing new and better techniques, constantly linking through to our sector’s research providers, for example Plant and Food Research. 

We are however living in extraordinary times, where the pre-Covid norms do not apply.  But there is a perception that New Zealand will return to normal given just a little time.  Even when the wage subsidy comes off, according to Treasury, unemployment will not go above around 10% and is predicated to gradually ease to around 6% by early 2022.  All this is indicating that the country will go back to normal or near normal.

However, there are major economic and social changes that people haven’t thought through the consequences of yet.  A key difference is that international travel will, according to the Chief Executive of Qantas, not return to 50% of pre-Covid levels until 2022.  The consequences of limitations on international travel are:

-  International tourism for the next few years will be non-existent
-  International worker mobility around the world will be severely restricted
-  International education opportunities will be limited
-  Airfreight that relies mostly on international passenger flights will also be severely restricted (most freight is put in the hold of passenger jets).

The impact of the above on the New Zealand economy will be profound and long lasting.  This is because domestic tourism will never replace international tourism earnings.  Similarly, online learning will never replace the income that having international students studying and living in New Zealand generates. 

For horticulture, access to specialist and seasonal offshore workers will be limited. Also, the lack of airfreight will mean up to triple the pre-Covid cost to charter planes to deliver time sensitive produce.

I think this will cause major and long-lasting changes to how our economy is structured.  Discussion has largely been focused on what will happen when the wage subsidy comes off and how can we redeploy New Zealanders who have lost their careers in tourism and international education.  But this is not the main challenge we are to face. 

It is a mistake to think that as a country, we are coming out of Covid.  We are in fact moving from the health phase of Covid to the economic phase, and I think the economic phase will be just as challenging as the health phase.

I also think that by the end of the year, even with no resurgence of Covid, New Zealand will be facing major social and economic upheaval.  This all comes from international travel restrictions.  Our focus so far has been on tourism and international education employees.  The real effect is the impact across the whole economy.

Take horticulture as an example, where export crops like cherries and persimmons rely on airfreight.  The cost implications will greatly increase growers’ costs and reduce their income to the extent that whether or not to export becomes a difficult decision.  The implication of not exporting is that New Zealand will not earn valuable foreign exchange to help pay for New Zealand’s import and health needs.  Even if these growers do export, there will be much less money to spend locally due to the higher costs. 

With skilled and seasonal labour, even if there is access across borders, the time and cost implications of quarantine will have a significant impact.  Our current experience in getting these workers back to their home countries has not been easy, due to their governments’ legitimate concerns about the spread of Covid to their countries.

Not being able to return home has both social and financial costs for the workers and their employers.  Offshore workers are separated from their families for longer, and have to pay for rent and food when they are not earning, or earning much less than they were when undertaking seasonal work.  This situation reduces their and their employers’ spending in their local communities.

This all adds up to less funding for innovation, research and development – at the very time when we need more funding to work out ways around these changes.  The response falls to joint efforts by both Government and industry.  The Government’s role is to set flexible policy settings to support industry, as this massive transformation takes place.  Some examples of this are to permit all stranded offshore visa holders to be able to work in any industry for all of next year. 

This will need to be balanced against the availability of New Zealanders, but note that unemployment is predicated to drop to around 6% by early 2022.  This means there will be a shortage of seasonal workers next year as there will be fewer New Zealanders available and limited access to offshore workers.  This will have a massive impact on how much fruit and vegetables we grow and export.

I do not think it is overstating the situation to predict that as a country, we are facing substantial social and economic upheaval.  The only way we can manage this is for both Government and industry to work together to redesign immigration, social welfare and other services. 

This is critical because as a country, we do not have many economic options available, with tourism and international education no longer what they were.  We need to rely on other industries, the primary sector and in particular, horticulture. 

Bold decisions are needed now, and we are working with the Government on policy changes to enable remaining industries to prosper for the good of the country.  Making these decisions will create certainty for growers so positive planting and export decisions can be made so the economic crisis I am predicting can be avoided. 

Mike Chapman, Chief Executive