laundry list of farm support programs grew, it became an increasingly impossible burden for this small national economy to bear, threatening to further undermine the stability of the whole system. support the majority of which was to sheep meat, wool and beef production was the first to be cut. In the first year, 1984-85, the effects of the cuts were offset by the benefits from exchange rate devaluation combined with high international commodity prices. It took longer to control inflation than had been expected. In the meantime, high real interest rates caused the exchange rate to appreciate again and this, combined with two years of lower international commodity prices, made the adjustment for New Zealand s farmers to their loss of policy support much more painful than would otherwise have been the case. Land prices fell when support was withdrawn, leaving some farmers severely indebted, whilst farmers in marginal areas found it hard to compete in the undistorted market. Some support to ease the adjustment process was forthcoming from the Labour government after it was returned to power in 1987. agencies in all sectors were subject to new public management aimed at increasing their efficiency. Within the Ministry of Agriculture and Fisheries reform began in 1985, with initial targets set for cost recovery of services such as quality control and extension. Organisationally, services were separated from policy and ultimately the former were either privatised or spun off into independent agencies. interesting exception to radical reform was the preservation of export marketing organisations. Instead of introducing competition, efforts were made to increase their efficiency and accountability to producers. was eventually brought under control in 1989 and both the economy as a whole and the agricultural sector in particular resumed growth in the early 1990s. There was some switching out of sheep meat and wool towards, in particular, dairy and horticulture. Overall, farmers managed to raise total factor productivity, so as to maintain overall output levels with reduced inputs, thereby fairly quickly restoring profit levels after an initial shock. Zealand s reforms were not opposed by the main farmers organisation. This broadly supported reform and indeed, pressed the government to reform other sectors such as ports and transport where inefficiencies impaired the competitiveness of export agriculture
According to the Kiwi outlook, the ill effects of subsidies include: [6]
1. Resentment among farmers, some of who will inevitably feel that subsidies are applied unfairly.
2. Resentment among non-farmers, who pay for the system once in the form of taxes and a ...
