Will charging for water result in fewer jobs or higher food prices?

Will charging for water result in fewer jobs or higher food prices?

Answer

No. 

Most of our food prices are set by the international marketplace, so changes in New Zealand input costs will not have an impact on food prices.

This is certainly true for dairy products most of which are exported and a fair proportion comes from regions that do not require significant irrigation.

Even if there is a charge for water it is likely to be a small fraction of the final value of the product, just as the cost of coffee beans is a tiny portion of your $4.50 flat white. Changes in input costs happen all the time without retail prices changing.

Charging for water will encourage this scarce resource to go to the most efficient users. Over the medium to longer term that will result in a more efficient production, and faster economic growth. It will also lead to better capital investment -currently when farmers gain the right to irrigate it increases their land values by around $8,000 per hectare. The largest change after charging for water will be a drop in land values for the farmers with the right to use water for free at the moment. Lower land prices will over time mean lower debt, which will reduce the cost of running a business. Eventually it is likely to lead to lower food prices and more jobs.