Petty politicking in lieu of policy

19/06/2019

Minister of Shane Jones has no good policy answer for 50 Shades of Green’s concerns about favoring forestry over farming so has resorted to getting petty politicking:

Minister Jones is both wrong in fact and totally out of court with his accusations against the conservation lobby group 50 Shades of Green.

To claim, as he did, that we’re part of the National Party is a little like suggesting James Shaw is about to join Act 50 Shades of Green spokesman Mike Butterick said.

“I find this type of political loquaciousness offensive and cheap,” Mike Butterick said. “If Minister Jones has any hard proof maybe he’d like to share it.

“50 Shades of Green is a non-political organisation committed to maintaining prosperous provinces.

“Minister Jones obviously wants to achieve the opposite.

“Anyone is welcome to join our organisation regardless of colour, class, creed or political persuasion,” Mike Butterick said.

“All they need is a strong belief in provincial New Zealand and be prepared to work to maintain its prosperity.

50 Shades of Green was born of concern about the threat subsidies for forestry pose to the future of rural communities and food production.

It’s a political issue but it’s not a partisan one.

That the Minister is resorting to political attacks shows he’s not really listening to the concerns being expressed by farmers, local body politicians, real estate agents, stock agents and others who understand how serious the rapid afforestation of productive farmland is.

If nothing is changed rural communities with be even harder hit than they were by the ag-sag of the 1980s.

Serious concerns deserve a far more considered response than petty politicking from the Minister.

You can read more about the issues at 50 Shades of Green

You can sign the petition asking that legislation which incentivises the blanket afforestation of farmland be rejected


Reject blanket afforestation of farmland

10/06/2019

Government policy which subsidises forestry is a bigger threat to food production, rural communities and the New Zealand economy than the ag-sag of the 1980s.

North Otago was particularly hard-hit by the stripping of subsidies that coincided with high interest rates and soaring inflation.

Many farms were too small to be economic and the district was plagued by recurring droughts.

Predictions that farmers would be driven off the land in great numbers proved to be an exaggeration. But many jobs on farm and in businesses that serviced and supplied them were lost and very few of the farmers’ adult children who left the district for education or work returned.

Farmers gradually adjusted to life without subsidies and are stronger for it. Inflation and interest rates returned to manageable levels, irrigation provided protection from droughts and created jobs on and off farm.

There will be no recovery and resurgence of rural communities when productive farmland is replaced by forests.

Subsidising forestry and making it easier for foreign buyers to buy land for forestry than farming is already killing on-farm jobs.

50 Shades of Green paints the local picture:

  • 100,000 stock units sold to forestry in the Wairarapa these last twelve months
  • Economic impact on Wairarapa community? Direct spend at $125/stock unit: $12.5m. Plus four times multiplier effect.
  • — 1,000 hectares sheep/beef farm creates seven jobs.
  • 1,000 hectares plantation forestry creates one job.
  • Tree planting by temporary immigrants… most of the wages are sent home.
  • — Rural communities will be decimated.
  • — Farm land prices have been pushed up by these taxpayer
    subsidies
    .

It’s not just in the Wairarapa and it’s not just farming jobs that are lost. Fewer people on farms means fewer children in schools, fewer people buying locally and fewer work opportunities servicing and supplying farms and farmers.

It  means less food produced for the local market and export and less export income.

It is also counter to the Paris Climate Accord which states that climate mitigation should not be at the expense of food production.

This is the motivation for the petition asking that legislation which incentivises the blanket afforestation of farmland be rejected:

. . .There has never been such an imminent threat to food production in New Zealand as that which looms over us in the form of current government policies which align across multiple government portfolios designed to meet specific policy agendas.  These agendas combined, create a massive assault on the viability of rural businesses, on sustainable land use, on infrastructure and ultimately on the lives of those living the experience of this assault.

We need your support as we fight to provide a voice for the industries and communities rendered defenceless in the face of ill-conceived afforestation incentives which are already leading to unemployment, displacement and declining standards of living for those left behind.

The tension between competing land uses has long existed between forestry and pastoral farming; however never before has a government provided the mechanisms for one to obliterate the other to the extent that this potential now exists.

It is this case that we ask your support in defending.

Not that forestry should be maligned, but that the Government of today and Governments going forward must be made to see that crippling small towns through distorted market incentives is morally wrong, economically foolish and will impact vulnerable individuals and communities for generations to come.

It’s not just morally wrong and economically foolish, it’s socially destructive, it’s not backed up by science and will do more harm than good to the environment.

The government ignored advice from Environment Commissioner Simon Upton who said the science shows trees could off-set methane emissions but would not offset fossil fuel emissions.

If New Zealand produces less food, it will be replaced by meat and milk from other countries whose farmers are far less efficient than ours.

We have already picked up the torch of environmental restoration and we willingly carry it as the legacy we leave for those who come after us; in this we are already united, but a crippled community can restore nothing, and an empty community will not care.

We ask you to join your name to our petition and stand alongside us as we defend our common right to live and work on the land, growing food for our country sustainably, ethically and for the benefit of all New Zealand. 

Some areas should never have been cleared and should be replanted in trees.

But there is no economic, environmental or scientific justification for turning productive farmland into forests.

 

 


Subsidies shape silly responses

25/01/2017

The ag-sag of the 80s was tough, but let’s not forget the silly subsidies that led to it.

Sheep numbers peaked at  70 million in 1982 which was around 22 sheep for every person.

We’re down to only six sheep each now, but farmers have replaced quantity with quality.

The total number of sheep was down by just over 5 percent between June 2015 and June 2016, Statistics New Zealand said today. Provisional figures show that the number of sheep in New Zealand fell by 1.5 million, down to 27.6 million at 30 June 2016.

“Between 2006 and 2016 the number of sheep reduced from just over 40 million, a drop of around 30 percent,” agricultural production statistics manager Stuart Pitts said. . . 

Improvements in breeding and feeding are producing better stock and the amount of meat we’re selling is stable in spite of the fall in sheep numbers.

Returns from sheep meat continue to disappoint but the answer isn’t subsidies.

As the video shows, expensive subsidies shaped silly responses. Farmers went for quantity rather than quality and produced meat for which there was no market.

The video is one of a series of  short videos, Trailblazers: The New Zealand Story from Free to Choose Media.

The others are:

Main preview

Public Sector Reforms

Empowering Ordinary People

Fishing Reforms and Sustainability

Hat tip: Utopia

 

 

 

 


Commodity prices then & now

23/01/2016

Baker & Associates’ excellent weekly AgLetter compares commodity prices 18 months ago with current ones:

Oil price down 70%:     June 2014 ‐ US$103/barrel January 2016 ‐ $US30/barrel

Wheat price down 57%     June 2014 – US$287/tonne   January 2016 ‐ $US164/tonne  

US Beef down 16%       June 2014 – US$2.00/lb   January 2016 ‐ $US1.67/lb

US Lamb down 30%     June 2014 – US$1.37/lb   January 2016 ‐ $US0.95/lb

Whole Milk Powder     June 2014 ‐ $US3459/tonne January 2016 $‐ US2188/tonne

DAP Price down 20%     June 2014 ‐ $US499/tonne January 2016 ‐ $US399/tonne

NZ/US Exchange Rate down 25%    June 2014 – $0.8670    January 2016 ‐ $0.6540

NZ Floating Interest Rate down 1%    June 2014 – 6.07%    January 2016 ‐ 5.1%

NZ Inflation Rate down    June 2014 – 1.6%    January 2016 – 0.1%

It appears that the global economy is facing challenges on a similar scale to those of the GFC five years ago.

In 2008, the problems arose from over‐priced assets in the US and EU markets, and with incompetent finance sectors in those markets.

The current problems appear to arise from a slowdown in the economies of emerging markets (China and India), upon which western markets have become increasingly dependent over the last 10 years.

The implication for NZ agriculture will depend on how the combination of “plusses” and “minuses” balances out . . .

NZ Agriculture Hangs in the Balance

On one hand we have depressed in‐market prices for red meat, grain and dairy produce.

On the other hand we have record‐low interest rates, record‐low inflation, a weaker exchange rate, low fuel prices, low freight prices, low electricity prices and lower fertiliser prices.

We have the TPP about to be signed. We have a low‐cost grass‐fed production base.

There’s got to be something to work with here.

Possibly the biggest challenge is to accept the reality that commodity prices are going to remain highly variable, and that driving Efficiency of Production is the main tool that farmers have to secure profitability in the coming years.

During the ag-sag of the 80s we faced plummeting prices for what we were selling and high prices for a lot of what we had to buy, wide spread trade restrictions and tariffs, inflation nearing 20% and interest rates even higher.

Produce prices are low and not likely to go very high very fast.

But on the plus side we’ve also got lower costs of fuel and other inputs, better trade access, and low inflation and interest rates.

Those of us who survived the ag-sag also know that there’s no point wasting energy worrying about what we can’t control and opportunities from concentrating on what we can control.

P.S. The AgLetter is a weekly publication from Baker & Associates. You can find how to subscribe and back copies here.

It’s always a good read.


Stealing from the future

23/03/2011

My parents generation came through the Depression with the very firm belief that saving for a rainy day was better than borrowing to enjoy the sun today.

My generation got a reminder of the good sense of that when the ag-sag of the 1980s hit.

We didn’t like it at the time but the tough prescription of Roger Douglas’s Budgets were a very necessary correction of the policies of successive governments from the early 1970s. They spent more than they earned, taking the country into debt which was in effect stealing from future generations.

Reducing the burden of the state and freeing the economy to allow better growth were worthy aims which were subverted by Labour from 1999. Michael Cullen reduced public debt and achieved Budget surpluses but he also increased government spending, gave welfare to people in want rather than need and increased taxes.

The worst damage was done by the extravagant promises which Helen Clark used to win the 2008 election. The productive sector was in recession but it was disguised by high government spending and consumer spending and escalating property prices fuelled by borrowing.

We were already in recession when the global financial crisis hit. Recovery has been patchy at best and the economic impact of the Christchurch earthquake has been the last straw.

The government has recognised the seriousness of the situation and is making it clear there will be no pre-election lolly scramble. There won’t be any increased spending at all – if there is more in one area it will have to come from less in another.

The left either can’t or won’t see the sense in this which gives voters a very real choice in the election.

Labour and its potential allies  want to steal more from the future. National knows the lesson the Depression taught my parents still hold true.


Simple is better

01/10/2010

It’s 14 24 years today since a Goods and Services Tax was first introduced in New Zealand.

It was right in the middle of the ag-sag when every cent mattered so I was among the many who bought things in September to avoid the 10% consumption tax.

I don’t remember rushing to buy anything before GST was increased to 12.5% in 1989 and I haven’t done any extra shopping to beat today’s increase to 15%.

Although I did a pre-GST shop in 1986 I don’t remember noticing sharp price increases from October 1 and do recall some goods reduced in price because the plethora of sales taxes on a variety of goods was replaced by a single, simple GST.

Simplicity was and still is one of our GST’s good points.

That Phil Goff and Labour are prepared to tinker with it and end more than a decade of cross-party support for keeping it that way is a sign of desperation.

It could also be a sign they’ve given up trying to win the next election. That’s easier to believe than the idea that they’re really serious about the suggestion zero rating GST on fruit and vegetables would achieve anything worthwhile.


Memories of the 80s

03/09/2010

Rural people remember the mid to late 80s for the difficulties of the ag-sag.

The removal of subsidies -which I now agree was a good move – coincided with high interest rates (we were paying around 25% for seasonal finance at one stage), raging inflation and a very high dollar.

In North Otago and much of the rest of the east coast we also had to contend with recurring droughts.

Until the share-crash of 1987 the country endured the pain while the cities partied.

The freer economy which made it so difficult in the country as farming was dragged into the real world, provided plenty of opportunities for money making in cities.

This video clip from a Close-Up programme shows a little of how it was done and features a longer-haired and greatly bespectacled John Key.

Hat Tip: Kiwiblog


The d word

17/04/2010

The Oamaru Mail has headlined the d word: Drought declaration looms for Otago region.

We had a short, sharp downpour on Thursday which has taken the pressure off us but we’ve got irrigation, scale and diversity.

It was a very localised rain and even those who got as much as we did will still be facing some tought decisions if they’re dryland farming.

North Otago has been dogged by droughts since farming started here – and no doubt before.

This dry is unusual because it’s taken so long for public acknowledgement.

When there wasn’t much irrigation, all farmers stopped spending when the weather got dry and it didn’t take long for the town to fell the impact.

I think now there’s now enough irrigation to keep the money flowing into Oamaru so the town hasn’t been affected the way it was in the past.

We look across green pasture to dry paddocks in the distant and are grateful we’ve got irrigation. It must be hard for those on the dryland looking back the other way as they run short of feed and have to face up to quitting stock.

There was a dusting of snow on the Kakanui mountains yesterday morning. It was gone by lunchtime but it’s a sign that temperatures are dropping so even if the region gets more rain soon, it will be too late for pre-winter growth.

One good thing about the decrease in the sheep population is that there is plenty of space at the freezing works so farmers needing to reduce stock will have somewhere to send them.

Lambs are selling for about $75 dollars and ewes for around $55. Two year old beef cattle are fetching about $950.

It may not be a fortune but it has been much worse.

When the ag-sag of the 80s coincided with a drought some farmers got bills when they sent stock to the works because transport and killing charges exceeded the value of the animals.

PS Contact details for the Rural Support Trust which helps rural families facing an adverse event – climatic, financial or personal – are on this website.


A new breed of rural women

15/10/2009

Some women are rural by birth, some by choice and others like me become rural by marriage.

It’s now more than a quarter of a century since I took on my farmer. Back then it was the norm if you married a man of the land to follow him to his land regardless of whether or not you could follow your own career in the country.

Now, many younger women place a much higher value on their right to follow their chosen path then my contemporaries and I did. But some still find that they can’t have it all. It isn’t always possible to follow their careers if they follow their hearts and find themselves on a farm too far from a city for commuting.

Irrigation has brought farmers’ offspring and other young people back to our valley for the first time since the ag-sag of the 1980s. Some are women coming home to farm, more are men and many of them have  brought partners or wives with them.

Among them are intelligent, well-educated, confident young women with established careers and some find they aren’t able to carry on working in their chosen fields.

Improved communication through texting and the internet mean they aren’t as isolated as they would have been a decade or two ago. It helps that it is no longer unusual to have women working as stock agents, fertiliser reps, vets and in other positions which were once regarded as “men’s jobs”. But the women who choose farmers still have to adapt to a different way of life in the country.

They aren’t martyrs, though. Some take an active role on the farm, some find other ways to use their talents in paid work and in the community.

The theme of this year’s International Rural Women’s Day, which is being marked today, is rural women at the heart of innovation.

The new breed of rural women is living proof of that.


Meat prices positive but costs up too

15/06/2009

 Westpac and National Bank forecasts both paint a positive picture for meat in the next couple of years.

The only threat to meat prices appears to be the exchange rate, but the National Bank, in its Rural Report publication, said there was no reason the New Zealand dollar should stay high given the country’s high debt, large and ongoing current account deficit, and low to no economic growth.

It forecast two years of easing to about US49c before increasing to US60c.

Lamb prices have defied predictions of doom even in the face of a relatively high dollar, partly because of a drop in the ovine population after droughts in Australia and here. The large number of dairy conversions in the past couple of seasons have also led to steep falls in sheep numbers.

While supply has dropped, demand has been steady or risen.

The reports say the sheep meat industry should enjoy good conditions for two more years at least.

The reasons behind this season’s high prices – low lamb numbers, a weak pound against the Euro making UK lamb exports viable, and strong retail sales – should remain.

Farmers would also benefit from meat companies competing for lamb.

Some commentators were expecting a decrease in dining out as the recession bites to dampen demand for lamb but it appears any drop in orders from resaturants has been more than compensated for by increased sales at supermarkets as people rediscover the joys of home cooking.

Beef prices are a little more uncertain although reduced numbers after a big kill in the USA last season and on-going drought in Argentina will impact on supply.

Prices are only one half of the business equaiton and while they have gone up so too have costs.

Meat and Wool Economic Services survey of sheep and beef farm input prices show on-farm costs in the past year went up by 7.6% in the past year.

The biggest rise was in fertiliser which went up 33.8%;local body rates increased 5.6%; interest rates dropped by 6.7% and fuel prices dropped 14.2%.

The overall cumulative on-farm inflation for the five years to March 2009 was 32.2% and over 10 years on-farm inflation rose 50.4%

That compares with consumer prices which increased by 16% over five years.

If interest is excluded the underlying rate of on-farm inflation in the past year was was 10.7 per cent compared with 9.8 per cent for the previous year.

dairy 10003


Who Benefits from Subsidies? – corrected

09/05/2009

A post on Anti-Dismal about who gets what from agricultural subsidies concludes the biggest gains go to the landowner. * corrected below

That is backed up by this paper by Chris Nixon from NZIER which says that product prices are capitalised into land prices.

The findings Anti-Dismal points to, indicate it doesn’t matter if they are real market prices or ones artificially inflated by subsidies.

However, if the impact of the removal of subsidies and the ag-sag which followed that is any indication,  subsidies benefit those who depend on farmers too.

When subsidies were removed after the 1984 election, farmers were brought kicking and screaming into the real world and many feared there would be a mass exodus from farms. Farm values fell – adding credence to the view that product prices are reflected in land values – and some people were forced to sell, but most hunkered down and learned to stand on their own feet.

However, when the subsidies went, farmers’ incomes fell,  they stopped spending and jobs were lost downstream. The worst effects weren’t felt by farmers but by the people who processed what they grew, worked for, contracted to, supplied and serviced them.

If the removal of subsidies hurt those downstream more than farmers, they must have benefitted from subsidies too.

Correction: * Paul Walker points out in a comment below that it was the farmer not the landowner who benefits most.

Since it’s now two days after I made the original post, I’ll address that in a new post.


Royal Show to go

01/05/2009

If the Canterbury A&P Show was under threat, agriculture in New Zealand would be in a very sorry state.

What then does the demise of the Royal Show at Stoneleigh in Warwickshire say about the state of agriculture in Britain?

If the collapse of Lehman Brothers and the fire-sale of Merrill Lynch were powerful symbols of the end of the City as we had come to know it, then the demise of the Royal Show, the premier farming event of the British calendar at Stoneleigh in Warwickshire, is a totem of the end of our countryside.

A&P Shows in New Zealand had some pretty lean years in the wake of the 80s’ ag-sag but most have done better in recent years, partly as a result of better farm incomes but also by adapting to attract urban people with little or no knowledge of , or interest in, farming.

Fortunately not all British Shows are under threat and those which are thriving:

. . . aren’t anymore about red-faced, burly farmers looking for a new bull and horny-handed sons of toil trading harrows. . .  They have an obligation, if they are to survive, to entertain as well as to trade. And, sad as it may be for those who have farmed the land for generations, that is a rubric for the countryside itself.

If farming is in terminal decline . . . then other uses for the countryside have to be developed and encouraged, beyond building new homes across swathes of it. And that requires both imagination and a new covenant between town and country.

As matters stand, the two are more estranged than ever. . . The new appointment of the South Downs as a National Park only serves to show how the Government believes that rural beauty is to be corralled, rather than integrated in to the rest of our economy. As a nation, we need to decide what we want from our countryside.

They also need to decide how much they’re prepared to pay for it. Farming certainly isn’t in terminal decline in New Zealand and is probably better placed than other sectors to withstand the recession. One of the reasons for that is that we were forced to enter the real world in the 1980s in contrast to our British counterparts who are still dependent on subsidies and find they and their incomes are governed by political whim rather than their markets.

But although we’re standing on our own feet there are still people and groups with strong views on what they want from and for our countryside and who want to tell us what to do and how to do it.

There is some comfort in the knowledge that the government has a better understanding and appreciation of farming than the previous one because here, as in Britain,  farmers are very much a minority and the rural-urban gap is very wide.

That’s one of the reasons that A&P shows are important, not only are they a  measure of how farming is doing, they’re also a plank on bridge between town and country.


Country rentals attracting crims

07/04/2009

When jobs on farms and in farm servicing went in the 80’s ag-sag so did the people who’d done them, leaving empty houses.

The houses were offered for rental and the hard working people who’d been part of their communities  were sometimes replaced by people who moved to the country knowing they wouldn’t get work and who supplemented their benefits with criminal activity.

Otago police warn that this is happening again.

Const Tremain said criminals, or others, who wished to evade the attention of police for whatever reason typically targeted rural and semi-rural locations.

“The isolation and a smaller police presence are the main reasons, and they will take advantage of rural folks’ general good nature in order to get what they want.”

The shorter turnover of lifestyle properties has been exacerbated by dairying which has a high staff turnover so we don’t know our neighbours or our employees as we used to.  

We’ve had thefts of fuel and k-line irrigation pipes and a vehicle taken – but recovered – in the last couple of years and some calves went missing last spring.


Saving makes more cents than spending

05/03/2009

Spending our way out of a recession is a theory most farmers have difficulty getting our heads round.

Those of us who survived the ag-sag of the 80s are haunted by memories of interest rates going above 20% and have no intention of jeopardising our businesses and the jobs of our staff  by spending any more than we have to.

We are mindful that when we stop spending the impact is felt beyond the farm gate. The money from the dairy boom flowed into towns and now the white gold rush is over, the people who service and supply us are losing business.

The ODT reports  that Humes in Alexandra have made 15 staff redundant because of a fall in demand for the water troughs and cattle underpasses they make.

That’s a lot of jobs in a small business in a small town but none of the dairy farmers I’ve spoken to are in the mood for the sort of expansion which would generate the demand to provide work for those people.

When money is tight saving makes more cents – and sense – than spending.


Which is the oldest?

27/02/2009

The annual North Otago A&P show starts today.

Like many others it went backwards in the wake of the 1980s ag-sag but in recent years exhibitor and visitor numbers have improved, due in part to a change of date from November to February.

The two-day event retains the best of the old attractions – stock judging, horse jumping,  pet lamb and calf contests and dog trials.

I’ve never been tempted to enter the home industries competition but do admire the skill of those who produce light as air sponges and intricate hand crafts.

This year new attractions include sheep racing, a jelly bean spitting competition and the full throttle motor bike spectacular.

This is North Otago’s 144th show which makes it the second oldest in the country, I don’t know which is the oldest so  if you do, please tell me.


Generation gap 1

18/10/2008

The Herald editorial points out that the issues of one generation are lost on another.

Since the 1981 Springbok tour, there has, in fact, been no episode that any generation could regard as being of a similar defining nature. Could it be that such a signal event has now arrived?

Generations have been able to immerse themselves in a world dominated by computer technology, the web, galloping globalisation, deregulation and a rising Asian influence without economic hardship or even fear of its intrusion.

The dramatic events of the past few weeks have changed all that. Governments have remade the economic landscape. The worst may be yet to come. If so, this could, indeed seem to be an episode of unarguable importance. But will it be so when prosperity returns? And will questioning during a 2035 leaders’ debate of a candidate’s attitude to it appear largely beside the point?

I’d disagree with the statement that there has been nothing of a defining nature since 1981 because the ag-sag of the mid to late 80s was a defining issue for me.

But that proves the Herald’s point that what was important for some wasn’t  and isn’t necessarily for others, especially if they were young or not even born when it happened.


Silver lining

17/09/2008

As eyes anxiously turn to financial markets I’m reminded of the silver lining to the cloud of the 80s’ ag-sag.

Few farmers were hit by the 1987 share crash because their equity had plummeted and most had neither the credit or cash to invest in the share market.


Recession Similar But Positively Different in Provinces

04/07/2008

Brian Fallow  quotes Split Enz: History never repeats.

There is always some difference that makes a difference. But the similarities can be instructive, too.

A couple of Reserve Bank economists, Michael Reddell and Cath Sleeman, have been looking at six previous recessions in New Zealand – the imbalances which preceded them, what triggered them and what made them worse.

They draw no conclusions about the situation now, beyond saying that “there is nothing in the material in this article to suggest any greater reason for optimism” than the downbeat view expressed in the bank’s June monetary policy statement.

They note the mitigating factors – fiscal stimulus and commodity boom – but say these factors “have much to mitigate”.

By my count 12, maybe 13, of the 17 recessionary factors they list are at work now, two of them – a global credit squeeze and a large rise in oil prices – in spades.

The recession which made the deepest impression on me was that of the mid 1980s. There are several differences between then and now.

Our economy was a mess before then – subsidies, tarrifs and import duties protected producers and manufacturers and increased costs for consumers; just about everything was regulated and/or taxed. Then came the 1984 Lange Government and Roger Douglas’s first budget.

Subsidies ended and farmers were brought kicking and screaming into the real world. The dollar was floated and rose on the back of high interest rates – at one stage we were paying more than 25% on seasonal finance –  inflation raged, commodity prices fell but tarrifs kept the price of inputs up and the labour market was still heavily regulated.

North Otago was particularly hard hit by the ag-sag because too many farms were too small to be economic anyway and there was not much irrigation so we were forever suffering from recurring droughts. At one stage it cost more to transport stock to the freezing works than they were worth. Property prices plummeted and a lot of us were technically bankrupt, owing more than the value of what we owned.

As farmers retrenched those who worked for, serviced or supplied us were hit too and the problems spread to provincial towns. Meanwhile cities were booming on the back rising property prices and the sharemarket. It was only when the market crashed in October 1987 that cities began to feel the country’s pain.

A lot of economic fundamentals have changed since then. A small economy like New Zealand’s will always be at the mercy of international factors, but thanks to those “failed policies of the 80s and 90s” we are in a much stronger position to withstand the worst impact of them.

Another difference is that this time the problems are starting in the cities and, the impact of drought aside, the country is still doing well. Even though sheep farmers have had an appalling season, falling income has been cushioned by rising land prices.

While people are worried about what’s happening elsewhere, the North Otago economy is still growing and property prices are rising. There hasn’t been an empty shop on the main street for a couple of years and a retailer told me he’d paid more GST in the past two months than at any other time since he’d been in business.

People on low fixed incomes, and some earning more, are struggling with steeping rising prices of fuel and food. But the district’s economy as a whole is benefitting from development associated with increased irrigation and the dairy boom.

If we are in a recession right now, as many economists believe, it won’t be official until the June GDP figures are released in September.

And if the statistics mirror anecdotal evidence they will show that this time the recession is starting in the cities and the picture in the provinces is sitll pretty positive.


Country Could Weather Economic Storm Better Than Cities

05/06/2008

The ag-sag of the 1980s influenced my generation as the 1930s depression affected that of my parents. We determined never to be that vulnerable to the vagaries of political and economic cycles again and while many are starting to worry about the economic outlook farmers and rural communities are much better placed than we were 20 years ago.

 

The sudden loss of subsidies plus a high dollar, inflation and interest rates above 20 percent and low commodity prices had a devastating impact in the 80s. Land prices plummeted leaving many of us owing more than the value of what we owned. As we retrenched those who worked for or provided services to us, and processed our produce lost work and customers. Eventually the impact of the ag-sag spread from farms to rural communities and then to towns and cities, and the downturn was then aggravated by the 1987 share crash.

 

Now, interest rates and inflation are higher than desirable, but still well below the levels we faced 20 years ago and not all sectors are getting poor returns. Cropping farmers are enjoying a long awaited upturn and the dairy payout is at record levels. While sheep and beef incomes are dismal it is not like the 80s when farmers received bills for sending stock to the works because the transport and killing costs exceeded the price of the animals.

 

Higher land prices mean most still have good equity in their properties too although rising land values are not going to keep pace with many repeats of last season’s losses. However, while prices have a long way to go to make sheep and beef farming sustainable meat prices are improving and sheep and beef farmers can take heart from what is happening in other sectors.

 

While the rise in dairy and grain prices was anticipated, no-one picked the increase would be as fast and as great as it has been so there is hope for a similar resurgence in the meat industry. Beef prices are on record highs in the United States, it is only the high exchange rate which is diluting the returns to our farmers. The growing demand for protein throughout the world which is helping dairy farmers should transfer into meat prices soon. And the huge decrease in stock numbers in the wake of last year’s drought in Australia and drought and dairy conversions here means demand will outstrip supply and those farmers who have stuck with sheep and beef are well placed to take advantage of that.

 

The ag-sag hit North Otago particularly hard because it coincided with another of the recurring droughts which plagued the district. We’ve had only about 1/4 of our annual rainfall in the first half of the year, but the impact of dry weather will never be as bad as it was 20 years ago because a far greater area is irrigated now.

 

Reserve Bank Governor Alan Bollard is predicting tough  times ahead.

 

Dr Bollard said:

* Household spending – the main driver of economic growth in the 2000s – will contract over the next couple of years, despite the Government’s announced tax cuts.

* Economic growth will come to a virtual standstill this year and will grow well below par at 1.4 per cent in the March 2010 year.

* House prices are forecast to plunge from their peak last year, by 22 per cent when inflation was taken into account.

* Unemployment will almost double to 6 per cent over the next three years and job creation will go backward over the next four years.

In the 80s the recession was felt first and hardest on farms and in the provinces. This time because of the growing international demand for what we produce so well, the outlook for agriculture is brighter which means the provinces may be protected from the worst of what looks like an urban-led downturn.


Budget medicine

22/05/2008

The first Budget I remember listening to (yes, listening on the radio in the evening because – as Poneke reminded me – that was how you first received the news and when Budgets were delivered) was in 1975, my first year at university.

 

I was hoping for increased help for students. That we already got our fees paid; a living away from home allowance if our course necessitated moving from home to study; A or B Bursaries of $150 and $100 respectively (when weekly rents were about $7); anyone who had a vague notion that they might one day entertain the possible thought of teaching applied for and almost always received a studentship; and that people on pretty modest incomes were paying 60% taxes in part to fund all this largesse, was irrelevant.

 

I’ve forgotten what, if anything students received which supports the contention that we don’t appreciate what Government’s give us; and I don’t recall anything about subsequent Budgets until Roger Douglas’s first in 1984. That was the one was brought farmers kicking and screaming in to the real world by removing subsidies.

 

The sudden removal would have been difficult enough but the impact was worsened by raging inflation, high interest rates, a relatively high dollar and low commodity prices. While we had to face the real world, the labour market was still strictly regulated and there were tariffs on imports so while our incomes went down costs did not. The damage was compounded in North Otago where we were also facing another of the recurring droughts which dogged the district.

 

The economic and social deterioration of the ag-sag compounded as inflation and interest rates climbed, buoyed mostly by city property prices and the share market. Meanwhile farm prices plummeted and many of us found we’d gone from having reasonable equity to theoretical bankruptcy as our debts became greater than the value of what we owned.

 

Perhaps we were fortunate there was safety in numbers. Stock and station firms and banks to whom we owed so much knew that if they pushed a few they might start a landslide which would only aggravate the situation. By the end of 1987 the share market crash meant it was no longer just farmers and rural communities which were in financial disarray.

 

It took years to recover but the changes Douglas, and subsequently Ruth Richardson, made helped contribute to that recovery. So while we didn’t like Douglas’s medicine at the time and could argue about the method and timing of its delivery, few would disagree that farming and New Zealand are economically healthier because of it.

 

 

 


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