Factors in Pre-1914 Prosperity
The end of the long depression dates from about 1895. The year 1 July 1894 – 30 June 1895 marks a cyclical trough for exports; from then on, until the First World War, exports increased sharply and almost continuously, trebling in value in 20 years. This favourable movement has often been linked with the upward trend of world prices which characterised the world economy from the mid-1890s to the early 1920s, and it is true that butter prices reached their lowest level in 1894–95, cheese in 1895–96, and meat in 1897–98. Wool, however, continued to decline fitfully but substantially until 1901–02, and since it was the most important single export, the index of all export prices did not move upwards until wool had passed its nadir. Until about 1902, therefore, the explanation of the recovery of New Zealand's export earnings must be sought in rising volumes of the principal exports; only after about 1902 did rising prices add to their buoyancy.
All major indices of economic activity reflect the growing prosperity of the 20 years before the First World War. The area of occupied land rose only by a quarter, from under 32 million acres in 1891 to 40½ million acres in 1911 but, more significantly, the area of sown grasses, on which the bulk of pastoral production takes place, doubled from less than 7 million acres in 1891 to 14½ million acres in 1911. The number of sheep rose by more than a quarter, that of cattle more than doubled, and the output of coal trebled. Since the overall volume of production rose more rapidly than population, and the level of unemployment declined, there can be little doubt that real incomes also rose substantially. This impression is confirmed by a number of social indicators; for example, marriage and birth rates and the rate of natural increase of the population all turned upwards in the mid or late 1890s, after 20 years of steep decline during the depression.
The relative importance of the many factors which combined to account for this happier turn in the Dominion's fortunes are not completely agreed. Some historians have claimed a substantial part of the credit for the measures of the Liberal Government which assumed office early in 1891. Others are more impressed by the influence of the improving world economic situation, by the shift in the terms of trade in favour of the primary producing countries and, above all, by the unique combination of technical advances (all of them borrowed from abroad) which made it possible for New Zealand to reap full benefit from these more encouraging circumstances. The best known of these advances was the advent of refrigeration on oceangoing ships, which permitted the development of new export industries of frozen meat and dairy produce. Weight must also be attached, however, to the major fall in world shipping freights resulting from the change from sail to steam and from the development of the multiple-expansion marine engine, which alone permitted the antipodean farmer to compete effectively with the produce of his British and Danish counterparts. An index of world ocean freights suggests a decline of fully 75 per cent between 1873 and 1909, and in the case of New Zealand most of the benefit must have accrued after 1883, when the New Zealand Shipping Company initiated its direct and regular steamship connection between the colony and the United Kingdom.
The first cargo of frozen meat reached London (in a sailing ship) in 1882, but for several years failures were common, and costs were only gradually reduced. Moreover, it took time to fit out ships for the new trade, and to build and staff the freezing works. Above all, the flock and system of land utilisation could only gradually be adapted to the new conditions, dual purpose animals coming to replace the Merino which had predominated during the period when the sheep was valued chiefly for its fleece, and smaller farms with lusher exotic grasses were developed for the fattening of lambs.
The full impact of refrigeration on the dairy industry was even longer delayed: here growth was only on a moderate scale until near the end of the nineteenth century. The chief explanation is doubtless that, in the case of frozen meat, refrigeration merely made possible the profitable disposal of a joint product of an existing industry; whereas in the case of dairy produce a largely new industry had to be built from scratch, nearly all butter and cheese having been made on the farm prior to 1882. Moreover, the dairy industry's development has been more dependent than that of the frozen meat trade on technological advances other than refrigeration, and some of these advances occurred only at later dates. The continuous-flow centrifugal separator, which made possible the factory production of butter, had indeed been developed in Denmark as early as 1878, and was first introduced to New Zealand about 1883. But great importance, from the commercial point of view, attached also to the improved test for butterfat content evolved by Babcock in 1890, which made possible the payment for milk on the basis of its butterfat content, thus giving a major stimulus to herd improvement. Of even greater significance for butter production was the development of hand-separators in the later 1890s, which enabled the cream to be separated on the farm, and not, as hitherto, in the factory. Though at first widely opposed because of its adverse effect on quality, this development not only saved the expense of transporting the whole milk to the factory, but, by widening the area from which the raw material could economically be collected, also facilitated the amalgamation of the smaller dairy factories into larger units, thus achieving considerable economies of scale. This effect was the more marked with the improvement in roads after the First World War and the spread of the motor vehicle, permitting daily collection. The feeding of the skim milk to pigs has led to a useful supplementary source of income for dairy farmers. A final major advance has been the widespread availability of electric power in rural areas. In this respect New Zealand, with its abundant and cheap hydro-electric potential, which was rapidly developed in the post-1918 period, has ranked amongst the most advanced countries – hence the early installation of electrically driven milking machines, even on remote farms, again with beneficial effects on cost and output. By the mid-1930s, 83 per cent of cows were machine milked.
In view of the gradual evolution of these techniques, it is understandable that the full benefits of refrigeration should have become apparent rather more slowly in the case of dairy production than in that of meat. Up to 1914–18, the price differential favoured cheese, the production of which grew rapidly enough in the Taranaki area, then more densely settled and better roaded than other climatically suitable areas. The heyday of butter came in the period between the wars, when improved road and rail communication and the motor car opened up the Waikato – Hauraki Plains area of the North Island, which has since been the source of fully half of the country's butter output.