Rural round-up

July 17, 2019

New Zealand’s future food for thought :

Dr Jocelyn Eason, General Manager of Science and Food Innovation at Plant & Food Research, believes the future is green. And probably crunchy. But most definitely packed with nutrients.

Eason, who manages 140 scientists in the Food Innovation Portfolio at Plant & Food Research, believes the future of food lies in plants – and that New Zealand has both the scientific capability and growing expertise to be globally competitive in a plant-based food market. That means optimising plant genetics, developing future growing systems and capturing an eco-premium for new food products.

“The goal for us is to add value at each step of our food value chain. What does the market want?” That, she says, means looking at the consumption of the consumers of the future: Teenagers (GenZ). . .

Living in fear of farmageddon – Brian Fallow:

Will Farmageddon flow from the Reserve Bank’s plans to require some seismic strengthening of banks’ balance sheets?

Some of the submissions it has received in its review of bank capital requirements make sobering reading, especially about the impact on the dairy sector.

So first, some numbers. Bank lending to the agricultural sector has climbed from $12 billion in 2000 to $63b now — two-thirds of it to the dairy sector. It works out at $8300 per cow. . .

Scientists confident well-bred cows won’t burp – Michelle Dickinson:

Meat and dairy are New Zealand’s biggest earners when it comes to exports, however, they are also our largest contributor to greenhouse gas emissions. As we try to balance our economy with our commitment to the Paris climate agreement new research out this week thinks the secret to reducing climate change could be through breeding less burpy cows.

Methane emissions from ruminants including sheep and cows account for about a third of New Zealand’s greenhouse gas emissions and are by far the largest single contributor. Although methane stays in the atmosphere for less time than carbon, as a gas it is much more effective at trapping heat – acting as a blanket over our planet and playing a significant role when it comes to climate change. . .

You can’t blame Westland’s farmers for selling out – Mike O’Donnell:

Lee Iacocca died last week. One of the original rock stars of the car industry, Iacocca is credited with being the father of the Ford Mustang in 1964, considered the most iconic muscle car in automotive history.

The Mustang become immortalised in books, songs and movies – including Bullitt and Gone in 60 Seconds.

After being dumped by Ford, 15 years later Iacocca was credited as the man who saved Chrysler from going under by securing a US$1.5 billion government loan and paying it back within three years. . .

Farmers willing to pay big money for the best working dogs – Esther Taunton:

Heading dog Jack wrote himself into the history books on Thursday when he sold for a record $10,000 at an auction in Canterbury.

While it was a price fit to make townie eyes water, New Zealand Sheep Dog Trial Association president Pat Coogan said a good dog would be worth every dollar.

“The price farmers are willing to pay for a good dog has increased dramatically over the last 10 years,” he said. . .

FAST FIVE: Detroit Ririnui

Detroit Ririnui grew up in Welcome Bay in Tauranga where his family are in the kiwifruit industry but it wasn’t something he enjoyed very much. 

However, growing up in a rural environment instilled a love of the land so after a few years of working in the family business he made the decision to switch to dairying and says it was something he had always wanted to try.

He asked a relative if he knew of any dairy farm work and he told him he would give him a job in Invercargill. He made the move south where he is a farm hand on a 350-cow farm about a year ago and says he loves it.  . .


Their problems not necessarily ours

July 21, 2013

Visiting academic Robert Wade made the most of his opportunity on Q&A last week to opine about inequality in New Zealand.

He was alter forced to admit he’d been a bit sloppy and shouldn’t have included New Zealand in his view about the 1% ruling for the 1%.

He was wrong about growing inequality too. Brian Fallow writes:

The idea that New Zealand has become one of the most unequal societies in the developed world is just not supported by the data. . .

A standard measure of income inequality is a thing called the Gini coefficient; the higher it is, the greater the inequality.

Since the global financial crisis New Zealand’s has whipped around – it fell in the latest survey, reversing a jump in the one before – but the trend line through it is flat at a value of 33.

That is similar to the Gini scores of Australia, Canada and Japan, which ranged from 32 to 34, well below the United States’ 38 and a little above the OECD median of 31.

Another way of measuring income inequality is to look at the income of the top decile or 10 per cent of households (when ranked by income) and compare it with the bottom decile’s.

The average over the past four household economic surveys is that the top decile have received 8.5 times the income of the bottom one, after tax and transfers.

That puts us in the middle of the OECD rankings, and lower than Australia and Canada (8.9 times), Britain (10 times) and the United States (16 times).

The definition of income here is household disposable (or after-tax) cash income from all sources. So it includes transfer payments like New Zealand superannuation, Working for Families tax credits and welfare benefits.

The tax and transfer system dramatically reduces income inequality among the working age population compared with market incomes alone, reducing the Gini score by 22 per cent.

Again, this is similar to Australia (23 per cent) and not much worse than the OECD norm (25 per cent). . .

“For many OECD countries, lower income households tended to lose more, or gain less, than high income families,” the report says.

For New Zealand, however, there was a small gain for bottom-decile households of 1 to 3 per cent and a net fall, of around 8 per cent, for the top decile.

These facts don’t fit the narrative of a crisis of inequality which the left keep labouring.

There is poverty here but Rob Hosking points out that won’t be solved by importing solutions to other people’s problems .

Visiting academic Robert Wade brought in all the rhetoric about the “austerity” and “top one per cent” to these shores and imported them, holus bolus, into the New Zealand context.

Professor Wade later backtracked from his comments, but the important point is not a “sloppy” – to use his own description of his language – sermon from a British academic.

Rather, the important point is the way local “progressives”, as they like to call themselves, lap this stuff up. . . .

This goes further than the colonial cringe – it’s a kind of colonial S&M. Oh please humiliate us, the local anti-colonist progressives plead to their lofty offshore masters. Tell us how bad we are. Beat us, hurt us, and make us feel cheap.

Bring in all that guff about austerity measures, the top 1% of the country holding most of the wealth and making all the decisions and we’ll all just pretend we’ve got the same issues as the US or the UK.

It would not matter – apart from perhaps being a fascinating if rather hilarious study in group psychology – if it were not the fact this group then advocate importing their favourite solutions from their colonial, tenured masters northern hemisphere academia.

Fortuitously, the same week Professor Wade was titillating his local progressive followers with how dire New Zealand is the latest figures on inequality here came out.

And New Zealand is pretty well OK. Inequality isn’t growing – in fact, it has shrunk a bit in recent years – and the top 1% here get 8% of all taxable income – comparable with Sweden, Norway, France and Australia, and much lower than the UK (14%) and the US (17%). . .

So our colonised progressive movement is rather off the beam on this one and it is probably why the left in New Zealand is just not connecting with voters at present.

If you want to get elected you need to demonstrate you understand the concerns of the people you want to elect you, and that you have solutions to deal with those concerns.

Pretending the issues here are the same as the UK or the US, and getting academics in to pontificate about the solutions to deal with those other countries’ problems, is perhaps not the best way to go about this.

Nor does it seem particularly progressive.

That the left has to import other countries’ problems and solutions shows things aren’t nearly as bad here as they’re trying to paint them.

If they were they’d have plenty of local examples, supported by facts and figures and wouldn’t have to rely on those from foreign academics who have little knowledge of how things work here.


The right prescription?

December 12, 2009

Brian Fallow responded to the report of the 2025 Taskforce’s first report with a column headlined: Old precription unlikely to fix new ills.

Taskforce chair, Don Brash, wrote an op-ed in response which the Herald delcined to publish because “the debate is moving on”.

Just how far a debate moves in a day is a moot point. Understandably Brash wasn’t impressed so he emailed his response to several people and asked us to spread the word.

I think everyone has the right of reply so here it is:

Brian Fallow is one of New Zealand’s best economic journalists.  But his article on 10 December dismissing the report of the 2025 Taskforce as “1980s thinking”, under the headline “Old prescription unlikely to fix new ills”, misses the boat completely and demonstrates that he is out of touch with mainstream professional opinion.  The arguments for reducing the tax burden caused by low quality and poorly targeted government spending, for privatisation, and for better quality regulation are absolutely consistent, for example, with the OECD’s 2009 report on New Zealand.

In his article, he cites at length the work of the economic geographer Philip McCann.  McCann has argued that since the 1980s the world has changed profoundly – China has abandoned communism, India has abandoned autarky and the Soviet empire has collapsed.  McCann accepts that over the past century transport costs have fallen by some 95%, while telecommunication costs have fallen by that much in just three decades.  This has provided a huge advantage to “the geographical dispersion of activities which are not particularly knowledge-intensive and do not add a lot of value”.  By contrast, what McCann calls “spatial transaction costs” have, he argues, become more important for knowledge-intensive high value-added activities because of the premium attached to face-to-face contact.

He argues that the increased importance of “spatial transaction costs” means that economic growth and globalisation over the past 20 years have favoured large urban centres in almost every country (large and small).   But he goes on to argue that an implication of this is that, within the Australasian region, Sydney and possibly Melbourne are growing in wealth and size at the expense of the periphery – which in this case, he asserts, includes New Zealand.  The further implication is that at this stage in the development of the world economy there are factors which drive us inevitably to have incomes lower than those in Australia.

Professor McCann is a serious researcher, and deserves to be heard respectfully.  It is probably true that large urban centres attract a disproportionate share of a country’s innovation and entrepreneurship. 

But one implication of his argument is that small countries, and especially those which are distant from world markets, are inevitably doomed to grow more slowly than larger more densely populated countries – and that simply does not seem to be borne out by the facts.  Over the last 20 years during which Professor McCann claims the world has changed, small countries tended to perform a bit better than large countries – even New Zealand has grown slightly faster than the OECD average over that period. 

Compared with large countries like France, Italy and Japan – all countries with large conurbations – New Zealand has also done better, increasing from 82% of the simple average of the incomes of those three countries in 1989 to 87% in 2007.

Moreover, if geography were really an important part of the story, no one would have predicted Australia’s impressive performance relative to the rest of the developed world in the last couple of decades.

Professor McCann and Brian Fallow also suggest that in the brave new world after 1989 capital is likely to be flowing out of New Zealand to places like Australia.  In fact, of course, it is well-established that capital is flowing into New Zealand, especially from Australia.  Thus, we have one of the largest current account deficits around – and, by definition, one might expect us to be running surpluses if capital were leaving New Zealand for ever better opportunities abroad.

The report of the 2025 Taskforce acknowledges that smallness and distance may indeed be impediments to our growth.  But let’s suppose for the moment that our size and location have become a much more important barrier to the development of knowledge-intensive industries in the “periphery” than they were prior to 1989.  Do we have to wait until the global economy changes, until, as Brian Fallow suggests, we get the benefit of our “combination of ample rainfall, temperate climate and skilled farmers” as the world’s population climbs and more and more people move into income brackets which enable them to afford the foods of affluence?

Or are there things we can do to actively lift our living standards?  The 2025 Taskforce is in no doubt about the answer to that question. Distance is what it is.  Our population is what it is.  But we don’t need to have a company tax rate which is now well above the average of other OECD countries.  We don’t need to discourage people who have dependent children with effective marginal tax rates of well over 50%.  We don’t need to hobble our businesses with needless red-tape.  We don’t need to inflate the cost of housing by tightly constraining the supply of residential land.  Our government doesn’t need to squander capital in low-yielding but politically-popular projects.  And we don’t need a size of government that is materially larger than that in Australia.

Yes, Australia and other developed countries also do some of these dopey things.  But the Government has set a goal not just of holding our position on the OECD ladder – a position which has us well below the average of other developed countries – but of catching up with Australia by 2025.  We won’t do that with policies which are merely as good as the average of other developed countries; we will only do that with much better policies.  If distance is a significant impediment to our growth, that simply means that our policies have to be of absolutely top quality.  Right now, they are not, and in recent years they have gone backwards in several important areas even as other countries have continued to reform.  This slippage is totally omitted from Brian Fallow’s account. 

Do we need 1980s thinking?  Of course, where it is still relevant; absolutely not where it isn’t.  The recommendations of the 2025 Taskforce are absolutely consistent with orthodox economic thinking about how to accelerate economic growth and, as noted, are consistent in particular with the recommendations made by the OECD report on New Zealand a few months ago.


How much is enough?

October 8, 2008

Tracy Watkins thinks John Key is offering enough:

A year ago, Key might have risked over promising and under delivering on those amounts.

But that was a vastly different world..

The failure to deliver more may peel off some soft support among those who were leaning toward National but, because of Working for Families, will not be a whole lot better off.

But the rest will probably agree with Key that it’s a package that’s right for the times.

So is it enough? You’d have to say yes.

Colin Espiner says the tax plan is tailored for the times.

Herald commentators  aren’t impressed:

John Armstrong says families on low wages are not so well off with National but:

Overall, the tax package wins plaudits for being fiscally responsible. It won’t win big in electoral terms because of its generosity – someone on $80,000 only gets $6 a week more than they would from Labour’s package.

As for National’s plan for rescuing the (sinking) economy, there was nothing new today. We’re still waiting.

Audrey Young says:

National’s tax package does what it promised in some respects, doesn’t meet promises in other respects and offers some complete surprises.

One of the surprises was the promise of an independent earner rebate. . . .

. . . But the biggest concern will be National’s commitment to reverse what many see as protections in the KiwiSaver scheme that Labour recently passed.

They stopped a loophole allowing employers to effectively deny KiwiSaver employees pay increases on the basis that they have done deals on KiwiSaver contributions.

National sees this through different glasses, giving employers freedom to give non-KiwiSaver employees pay rises equivalent to their contribution increases to KiwiSaver employees.

Excepting one is pay rise for today, another is one you can cash in only at 65.

It is a recipe for exploitation and unfairness.

Brian Fallow says:

At first glance the big transfer of money in National’s tax package is from KiwiSaver accounts into people’s pockets.

In the short term that gives them more to spend at a time when private consumption is flatlining.

But you can’t have your cake and eat it.

. . . Other elements of the plan are also disappointing from the standpoint of lifting our long-term growth rate – less of an increase in infrastructure spending, and the scrapping of the research and development tax credit.

At least it does not make the rather grim fiscal outlook released by the Treasury any worse. But it is only marginally better.

 Inquiring Mind has done a round up of comments on the blogosphere, which covers a range of views, some of which as he puts it can charitably be described as a partisan perspective.

UPDATE: goNZofreakpower  and Dave Gee  weren’t on Inquiring Mind’s list but are also worth a look.

UPDATE 2: So is Liberty Scott.


ETS high cost no benefit

September 9, 2008

Brian Fallow’s column in this morning’s Herald points out the uncertainties over the cost of carbon.

The price the Government is assuming for the purpose of reporting its liability under the Kyoto Protocol in the Crown accounts is €11 ($23) a tonne.

But the high-quality, low-risk units New Zealand companies with obligations under the scheme are expected to favour are trading for €20.

And is the money being paid for this hot air going into research or developments which will improve the environment? No, and it might even make it worse:

It would be a perverse outcome for the global climate if growth of the pastoral farming sector in New Zealand were hobbled by climate change policy here, only for the demand for dairy products and meat it might have satisfied to be met instead by production elsewhere in the world whose carbon hoof-print (emissions per litre of milk or kilogram of meat) is greater.

Agriculture isn’t the only area where exporting emissions is likely and that’s because of a basic flaw in the Kyoto protocol. It takes a country by country approach to a global problem which means carbon emissions might be reduced in one place but increased elsewhere by moving production.

We pay the economic and social cost and the whole world pays the environmental cost because the ETS will add to the costs of production, transport and consumption but won’t reduce emissions.

It’s an expensive feel-good achieve-nothing fraud.


Lower dollar good news and bad news

August 12, 2008

The good news about the falling dollar, down to an 11 month low of US69.84c this morning, is that we get more for our exports.

However, the lower value of our currency also increases the price of imports which is particularly bad news for farmers when two of our biggest budget items – fertiliser and fuel – are already highly priced.

One reason for the dollar’s fall is the Reserve Bank’s decision to relax its guard against inflation by lowering the official cash rate.

Several commentators said this would be good for exporters, but I’m not sure how much better off we are if the gains on the swings of increased returns for our produce is countered on the roundabout of increased prices for inputs.

Nor do I think that a weak currency is a good recipe for a strong economy.

And I am definitely not relaxed about a little bit more inflation. The memory of the economic disaster which resulted when all the little bits more became a lot and led to inflation rates of more than 20% in the 1980s, and the painful process of bringing it down again, are still too fresh.

I’m with Don Brash who, when he was governor of the Reserve Bank, told a public meeting that a little bit of inflation was like being a little bit pregnant, it doesn’t stop at a little bit.

The B- I got for stage one Economics, as it was then known, doesn’t qualify me to debate this issue. But The Visible Hand in Economics and Show Me The Money  and Brian Fallow  are qualified and they all warn about the dangers of going soft on inflation too.

The falling dollar is a good news-bad news story for exporters and if it contributes to higher inflation the bad will more than outweigh the good.


Recession Similar But Positively Different in Provinces

July 4, 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.


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