Accounting and TaxFederal Budget

R&D spending in agribusiness provides opportunity for growth in agri-tech

Neil McAra
20 May 2022
5 min read

20 May 2022

Research and development funding for emissions reductions technology is the big winner for agribusiness in Grant Robertson’s Budget 2022, providing opportunity for further growth in New Zealand’s innovative agri-tech sector.

Other notable expenditures in this year’s budget include bio security and support for freshwater reform, however, farmers and growers might be left wondering what relief they will get from the rising cost of doing business.

Budget 2022, touted as the finance minister’s most difficult, was also New Zealand’s costliest and included $4.7 billion of new capital spending and an increase in operational spending of $5.9 billion. The Budget also itemised specific funding for announcements made in the Government’s recently announced $2.9 billion dollar Emissions Reduction Plan, which focussed heavily on how New Zealand can lower its emissions from agriculture.

With many large and loud competing funding demands needing to be balanced against significant inflationary pressure locally and a backdrop of global economic and geopolitical disruption internationally, the spotlight was on whether any of the Government’s big promises and flagship programmes would need to be hemmed in by Robertson. Or, would it be more big and bold spending as we have become accustomed to from the finance minister?

The answer was most definitely the latter with the government digging deep into its coffers and beyond, with spending of $128 billion this year and a significant deficit of $19 billion. This will help fund long term policy platforms as well as offering short term cash support in an attempt to combat the impact of rapidly rising costs on New Zealanders weekly budgets.

Funding snapshot for agribusiness

Biosecurity - $110.9m funding

  • $42.9 million to bolster New Zealand’s biosecurity readiness for future incursions.

  • $68 million over the coming year to continue the M. bovis eradication momentum.

Climate Change - $728m funding

  • Funding allocated towards the $710m of funding announced pre budget over four years for Agriculture and Forestry, as part of the newly announced ‘Emissions Reduction Plan’.

  • $339m into R&D including the establishment of the Centre for Climate Action of Agricultural Emissions.

  • $256.2m for forestry to help with sequestration of C02, 35.4m for farmers and growers to support a just transition.

Training and education - $230m funding

  • Funding boost for apprenticeships, and support for Mana in Mahi and Māori Trades and Training Fund.

Environment - $35m funding

  • Freshwater farm plan system to help enable the implementation of the freshwater farm planning system. Freshwater farm plans (FWFPs) will be progressively rolled out across all farms in New Zealand (above certain size thresholds) over the following four to six years.

Supporting business growth - $148m funding

  • Positioning our economy for long-term growth by investing in industry innovation and transformation.

  • Supporting industries to innovate and profit from a more secure economy through Industry Transformation Plans in construction, advanced manufacturing, agri-tech, digital technologies, forestry and wood processing, food and beverage, and fisheries.

Supporting business growth - $101m funding

  • Developing a Business Growth Fund to improve access to capital for small- to medium-sized enterprises. They are looking to partner with New Zealand’s major banks to grow the scale and reach of the fund.

Environment, climate change and emission reduction

Climate change and emission reduction were the focus areas for Agribusiness, with the budget allocating funding towards the $710m of spending over four years for Agriculture and Forestry as part of the Emissions Reduction Plan announced pre-budget.

$339m of this will go into R&D including the establishment of the Centre for Climate Action of Agricultural Emissions. This will add further impetus to New Zealand’s rapidly developing agri-tech sector in its quest to help Kiwi farms and growers, already the world most efficient in terms of emissions, reduce their carbon footprint further.

Forestry will play a major role in mitigation through $256.2m of funding to help with sequestration of C02, with sufficient support for native planting. This is a double edged sword and has been the source of heated political debate over the past five years as most new forestry replaces existing farmland and reduces agricultural output and employment.

$35m was also announced for the freshwater farm plan system to provide funding for the implementation of the freshwater farm planning system.

Industry training and education

Significant funding of $230m was announced for industry training and education in particular supporting apprentice level training. Should this be successful more skilled young kiwis will be put to work to support the building of rural infrastructure including building milking platforms, packhouses and other critical infrastructure for NZ Agribusiness.

Industry Transformation Programme

Although sparse on detail, the Government allocated $148m to the Industry Transformation Programme for the agri-tech, advanced manufacturing, forestry, wood processing, food and beverage, and fisheries industries. This could well materialise into incentives for investment into these industries, which would be a welcome addition to the business growth fund.

Cost of living

While Budget 2022 aims to alleviate directly some of the pain Kiwis are facing from rising costs of living via direct cash payments, inflation is also hurting Agribusiness and the record budget spending spree will add further fiscal stimulus to the already volatile situation in this regard.

Many of the key line items of business budgets such as compliance, wages, fuel, fertiliser and feed have increased significantly in recent times. While the budget offers some relief in terms of support around regulatory compliance to the sector as a whole, what will trickle down to under pressure farmer and grower budgets will be something to monitor carefully.

Check out the full coverage from Budget 2022, which will continue to develop throughout the day as new insights and video content are published.

Author: Neil McAra | Managing Partner

Neil is the Managing Partner of South and Head of Agribusiness, Neil leads over 100 staff with a focus on delivering absolute value and expertise to clients. He has 20 years experience in accounting and advisory services, particularly agriculture, manufacturing, estate & succession planning, corporate finance, business advisory, accounting, fishing, building and construction.