Little new money for agriculture: KPMG

Today's budget brought little good news for farmers and the rest of the agribusiness sector, a senior business consultant says.

"Beyond the changes to the tax structure ... there is little new for the agribusiness sector which had not already been well flagged by the Government in pre-budget announcements," said Ian Proudfoot, lead partner in KPMG's agribusiness arm.

KPMG warned last month that New Zealand has little as five years before its farmers are undercut by trade rivals.

"South America, Western China and Central Asia's large scale intensive farming practices have the benefit of lower cost land and labour and normally have less complex regulatory regimes," said the firm's agribusiness chairman, Ross Buckley.

In addition, they were closer to key markets and able to deliver food to the customer at a significantly lower cost than New Zealand companies.

He also warned about under-investment in infrastructure including water sustainability, information technology, new science and education.

At the same time, Mr Proudfoot warned government policy needed to be prioritised toward better investment, management and use of water resources.

Today, he said the budget failed to provide any significant funding to support the development of irrigation schemes, apart from $1.6m allocated to community irrigation grants to develop feasibility schemes and maintaining existing crown schemes.

"Getting irrigation schemes off the drawing board and into construction to drive improvements in productivity is ... critical to the future of the sector," he said.

"The budget delivers little to support development of this critical infrastructure."

The budget also provided no further funding for the rural broadband initiative, another key piece of infrastructure to drive improvements in rural productivity.

The benefits that farmers and growers gained from changes would depend on the structures through which they owned and operated their assets, he said.

The lift in goods and services tax was not expected to have a major impact on the industry, and neither was the axing of depreciation that could be claimed on long-life buildings, because relatively little of the industry's asset value was tied up in buildings.

But there was a risk that the removal of a 20 percent loading on depreciation of all assets could hurt the amounts that processing companies were prepared to invest in new capital-intensive facilities.

And the tax cuts were likely to stimulate the economy and trigger earlier, more significant increases of the official cash rate by the Reserve Bank, and that would in turn quickly hit profitability in the sector.