Country faces Northland bogey

BY NICK SMITH

The weather is the main topic of conversation at Ahipara, the seaside town at the foot of Ninety Mile Beach in Northland. If it doesn't rain soon, there will be severe consequences, is the locals' verdict. They're talking about golf.

Ahipara's justly-famous links course is already parched, the ball skidding on for tens of metres instead of pulling up at a decent distance. The ratio of lost balls, at $8 a pop for the cheaper ones, has soared. Another dry month will make the course unplayable, a disaster for the community of golfers.

They aren't the only ones suffering. Northland is enduring its first drought in nearly 20 years. The government has declared a "medium scale adverse event," an emergency status allowing businesses to apply for tax relief, among other measures.

Farmers will need all the assistance Inland Revenue will allow and more. A drought is a catastrophic occurrence for agricultural producers.

It is also, adds Federated Farmers economist Nick Clark, an economic disaster for the country.

The common element in the last two recessions in 2008 and 1998 was drought. Sure, the global financial crisis would have tipped New Zealand into contraction (we were already printing negative output when the crunch hit) but it was drought that stuffed the economy in the first instance.

New Zealand would have weathered the 1998 regional storm known as the Asian financial crisis relatively unscathed but for the lack of rain.

"Most commentators acknowledge that," says Clark, who points to the impact drought has on dairy production and the concurrent influence on New Zealand's export data, gross domestic product and general economic health.

In the 2007/2008 season, for instance, production from Fonterra farmers dropped from 1.25 billion kg of milk solids (kg/ms) the previous season to 1.19b kg/ms, a 4 per cent drop.

"That's 60m kg/ms, about $700 million knocked off the amount Fonterra farmers were getting in that year," he says, adding the figure is a conservative estimate. Milk production has been steadily increasing in recent years, fuelled by greater efficiency and a plethora of farm conversions to dairy. In the 2008/2009 season, Fonterra's herd churned out 1.28b kg/ms.

Its not just rural economies that will be cash-starved in a drought-induced crisis, Clark says. "The immediate impact will be on the rural economy but it inevitably flows through to the wider economy as well.

"These things have a knock-on effect," he adds. "First of all it's the farm, then it impacts the rural service centres and then it'll spread out to the bigger cities."

This is why economists are keeping a weather-eye on other vulnerable farming districts: Waikato, the North Island's east coast, Canterbury and central Otago.

"Who knows how severe any drought will be, if indeed we do get a widespread drought, but if it's anything like the one two years ago, it could be quite severe."

New Zealand's economic recovery to date has been a little like a toddler's attempts at their first unaided steps, which is to say shaky, with every chance of an injury should she fall. For drought to cut off at the knees New Zealand's economic baby steps to recovery would be the cruellest of ill-turns. The country's immediate hopes for future prosperity rest upon the weather.

National Institute of Water and Atmospheric Research figures point to a 55 per cent chance of under average rainfall this summer, reports Federated Farmers adverse events spokesman David Rose.

"That means there's a 45 per cent chance of average or above average falls," says Rose, a Southland sheep farmer who can spot a silver lining in the blackest bank of thunder cloud.

Big falls on the North Island's east coast in December should stand the region in good stead, he continues. Canterbury, Otago and Waikato are doing ok. The next three month's rain will decide the matter, one way or another.

This perilous situation, say farmers, illustrates the need for greater water storage in vulnerable regions.

"It would be great to see water storage come to the top of the government's infrastructure list," says Denis Anderson, the federation's Northland president, in a call for public contribution to the cost of such a project.

On a cost-benefit analysis, Clark says, a government contribution would be money well spent: "We see water storage as an insurance policy against drought and a pretty good investment when you consider the $700m or so that the previous drought cost the country."

A national system of reservoirs stretching from Waikato, down the east coast and from Canterbury to Otago would "future proof" national prosperity, adds Rose.

To his mind, "Our export returns are so vital to the country, we can't afford to ignore it."

- © Fairfax NZ News