Let’s not go back there

Phew, thank goodness the government appears to be back tracking  from suggestions yesterday that it would bail out Fisher and Paykel.

In a country where more than 90% of businesses employer fewer than 20 people, a company with 1600 staff is unusual and the impact of those job losses should the company collapse would be significant for the individuals, the wider commnity and the economy.

But the company is not about to collapse and even if it was I’m very wary of any suggestion that the government should invest to save it.

Easing the way should a foreign company wish to take a stake in the business would be okay but there’s nothing iconic about whiteware and even if there was that’s not a reason to invest taxpayers’ money in a company which makes it.

If there are any iconic industries here then they are those based on what we do best because of our climate and topography – growing grass and turning it into protein.

Fran O’Sullivan   writes about a couple of those, PGG Wrightson and Fonterra.

Speculation can easily turn into self-fulfilling prophesy so it’s important to make it clear that neither company is facing a situation which might make them need or ask for taxpayer assistance. However, if they were I’d be just as opposed to any suggestion of any government  investment in them as I am to the idea of a state bail out of F&P.

New Zealand dragged itself away from governement interference in, protection of  and subsidies to businesses in the 1980s with considerable pain for those caught in the fallout and we should resist any attempt to go back there.

There may be a difference between government investment in a company and a subsidy to producers, but I wouldn’t want to be in Tim Groser’s shoes if he was asked to explain that while putting New Zealand’s case for freeing up trade to our competitors.

If we make a sacred cow of a company which manufactures whiteware we’ll be in a much weaker position to argue against countries which build alters of subsidies for their primary producers.

For the record: I own a few Fisher & Paykel shares and our farm supplies Fonterra.

3 Responses to Let’s not go back there

  1. LaFemme says:

    I agree with you about those sacred cows, HP, I just hope we don’t start hearing the reverse argument of, say, Well Obama bailed out the failed, crappy Detroit auto industry, so we should be willing to at least help out a good one like F&P.

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  2. JC says:

    The thing to keep in mind is that it would take tens of thousands of small businesses to equal the export clout of say, Fonterra.. and we don’t mind the govt doing something for the little guys..

    So if Fonterra needed a billion dollar help at some (much worse) stage, then another billion for many to most small businesses would be on. Under a “value for money” option I should think a business friendly Govt mindful of moral hazard would think of something fairly innovative and productive for the long term.

    So what I’m saying is that if worse comes to worse, we have a non ideological PM interested in doing what works coupled with a slightly ideological Finance Minister capable of working with Treasury to produce something that’s prudent for the circumstances, ie, the least bad option.

    JC

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  3. LaFemme says:

    If you think of NZ business as a body, then Fonterra is an important part, possible even vital, but F&P is just a handbage accessory to the body corporate and should not be weighted in the same manner of importance as Fonterra…or that’s how I see it.

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