Rural round-up

August 3, 2019

NZ Centre for Political Research: A sacrificial lamb – Dr Muriel Newman:

The PM’s plan is to put so much pressure on farmers that she will drive them out of business, just as occurred in the coal industry, and oil and gas.

In a speech to state sector workers and children in Melbourne, Prime Minister Jacinda Ardern described a period of economic turmoil in New Zealand: “Starting in 1984, through to the 1990s, we removed regulations that were said to hamper business, slashed subsidies, transformed the tax system, dramatically cut public spending … “

She questioned whether the reforms were really necessary, then added, “I was a child back then, but I remember clearly how society changed. I remember nothing of Rogernomics of course — I was five. But I do remember the human face.”. . .

Allan Barber challenges Shane Jones to consider the unintended consequences of his headlong rush into forestry, as well as to disclose where all these logs or added value timber will be sold – Allan Barber:

There’s an irony about the combination of the Provincial Growth Fund funded one billion trees programme, sheep and beef land being sold without needing Overseas Investment Office (OIO) approval for conversion to forestry, the sharp fall in Chinese log prices, and Shane Jones ranting about log traders being intoxicated by high prices.

According to Jones, these log traders should have supported the domestic timber processing industry, although it’s not immediately obvious how domestic sales would have compensated for log exports to China which exceeded $3 billion over 12 months.

The history of tree planting, well before it was seen as essential for meeting greenhouse gas reduction (GHG) targets, is no different from any other commodity. After an exciting start too much of anything inevitably provokes indigestion; think oil, dairy, sheep meat, wool, angora, alpacas, logs – you name it, there is always a cycle; the world may even turn away from New Zealand Sauvignon Blanc one day. China features strongly as a market which has a habit of dominating purchasing patterns, driving prices up before turning the tap off, although this was more of an issue when the state rigidly controlled all purchasing. . . 

Growers slam ‘very clunky’ process for claiming fuel tax rebates – Maja Burry:

Some growers say they are being left out of pocket by Auckland’s regional fuel tax because there is no simple way to claim back for on-farm vehicles and machinery.

The 11.5 cents-a-litre regional fuel tax was introduced last July to fund transport projects around the region. It is expected to raise $1.5 billion over the next 10 years.

A rebate system, overseen by the Transport Agency, is meant to help growers and farmers claim back for on-farm vehicles and machinery.

Brendan Balle of Pukekohe-based Balle Brothers helps run a family-owned market garden business which employs about 300 staff. . . 

Northland dairy farmers win top milk award for fifth year running –  Susan Botting:

Producing top-of-the-line milk from 6000-plus dairy herd milkings over five years has earned Far North dairy farmers Terrence and Suzanne Brocx a dairy industry acknowledgement.

The Puketi couple have this year won a Fonterra award acknowledging their top-of-the-line milk production — for a fifth consecutive year.

Milk from the 2018-19 dairy season on their Puketi and Ohaeawai farms has this winter been awarded a Fonterra gold standard “grade-free” quality award, adding to four previous annual awards of the same type. This means all of the milk produced on their two farms since 2014 has reached the dairy co-operative’s highest gold standard quality standards. . . 

Stink bug warning to importers:

Biosecurity New Zealand has sent a stark message to shippers, agents, and importers that imported cargo must meet new rules intended to keep brown marmorated stink bugs out of New Zealand.

“The importing industry needs to be aware that high-risk cargo that hasn’t been treated before arrival will not be allowed to come ashore in most instances,” says Biosecurity New Zealand spokesperson Paul Hallett.

“The aim is to keep out a highly invasive pest that could devastate New Zealand’s horticulture industry if it established here.” 

Biosecurity New Zealand formally issued new import rules on 22 July. They require off-shore treatment of imported vehicles, machinery, and parts from 33 identified risk countries, and all sea containers from Italy during the stink bug season.

In the past, only uncontainerised vehicle cargo from risk countries required treatment before arriving in New Zealand. . . 

Hunters have their sites on a shareholding in a stunning high country shooting and fishing station:

Avid big-game hunters and trout anglers are being lined up as potential shareholders in a remote South Island high country partnership on the market for sale.

Shares are being sold in the land and buildings at the Miners Creek high-country station some 13 kilometres west of the Central Otago township of Ettrick.

The 513-hectare freehold property is located on the Mount Benger Range adjacent to the Department of Conservation’s Mount Benger Reserve. Combined, the two landholdings are home to red stags on its stark hills and brown trout in its pristine rivers. . . 


Quote of the day

April 2, 2015

To their credit, National has already identified that one of the key barriers to progress and development in many parts of the country is the Resource Management Act (RMA). This is certainly the case in Northland, which is rich in natural resources but poor in economic activity and jobs. But ironically for the people of Northland, by electing Winston Peters they may well have blocked the RMA reforms that are required to improve access to such resources.

The RMA is one of those Acts of Parliament that most people have little contact with. They are the lucky ones.

It’s the property owners and business people with initiatives that come into contact with the Act. Most come to dislike it intensely because they encounter first hand the extortionate demands of ‘affected parties’, the manipulation by activists, the huge costs extracted by the RMA industry, and the barriers put up by consenting authorities.

As a result, consents will often take years to go through the process – council hearings, the Environment Court, the High Court, the Court of Appeal, the Supreme Court, all costing applicants such vast sums of money, that in the end many are forced to abandon their project altogether. . .

While there are no doubt a multitude of ideas about how best to move resource planning forward to benefit the country – including the use of council case managers as advocates to guide applicants through the regulatory process and gain the cooperation of government agencies – at the heart of this matter is a realisation that holding back progress is not in the country’s best interest. Yes, we must be careful to minimise the impact of development on the environment, but we must also recognise that New Zealand families need economic growth and jobs if they are to thrive and prosper.

The irony is that as a result of the Northland by-election, the fate of the RMA is now in the hands of Mr Peters. Does he truly care about the long-term well-being of Northlanders, or is he too going to deliver more show than substance for his constituents – some new bridges and a bit of tar seal, when what they really need are jobs.  – Dr Muriel Newman,


Govt. control costs consumers

August 21, 2013

The Opposition is touring the country peddling its power policy.

Dr Muriel Newman points out is has already cost us millions of dollars in sabotaging the Mighty river Power Float:

Just days before the listing, Labour and the Greens announced their intention to regulate the wholesale pricing of the electricity industry should they become the government in 2014. This announcement created such a shockwave that the sale of Mighty River Power had to be suspended to allow investors time to back out of the deal. As a result many tens of thousands of investors who had expressed an interest in investing did not do so and many tens of millions of dollars were wiped off the value of the government’s shareholding. Within two days of the Labour-Green announcement, the share market value of Contact Energy, Trust Power and Infratil had fallen by almost $600 million.  

It is fair to say that as a result of the greed of the Maori Council and the political uncertainty created by Labour and the Greens, New Zealanders lost out. The proceeds of the Mighty River sale were less than expected, so less investment money is available for spending on hospitals and schools than would have been the case if Labour, in particular, had not played politics.

The point is that people have come to expect the Greens to demonstrate their deep socialist roots and extremism when it comes to policy-making. In spite of their clever portrayal of financial credibility, even a cursory examination of their policy proposals reveal how ideologically driven and deeply flawed they actually are.

However, the markets expect Labour to produce a rational policy platform – one designed to take the country forward, not backwards into the dark ages. Yet, if their plan to re-nationalise pricing in the electricity industry ever became the law, industry experts warn that the power cuts of bygone years, would again become part of our future. . .

The architect of National’s electricity reforms, Max Bradford, compares power policies of different political parties:

The Labour and Green parties have announced a policy to effectively nationalize privately and publicly owned companies by controlling their prices and their profits. NZ First proposes to reacquire the generation companies and create one large state-owned generator like the NZ Electricity Department (NZED) once was. They believe they can force down electricity prices, while at the same time guaranteeing security of electricity supply and encourage investment in electricity generation and distribution.

National, on the other hand, believes that the electricity sector works best within a competitive market, with a mix of private and public ownership, and regulation where there is no competition in those parts of the sector where there can be no competition i.e. the local lines companies and Transpower. This is the best way to get the lowest electricity prices consistent with guaranteeing security of supply and sector investment to meet increasing demand.

These are dramatically different approaches.

Furthermore, it seems that the National Government will proceed to partially privatize Meridian Energy now that the uncertainty over the Tiwai smelter’s future has been delayed for a few years. This follows the successful partial float of Mighty River Power.

National’s approach is followed by the rest of the world and gets security of electricity supply and the lowest power prices possible consistent with a long-term viable sector.

It is my view too, not from any ideological perspective, but simply from what achieves the best practical result for consumers: New Zealand’s energy history and experience in world energy markets shows that government owned or controlled energy companies cost consumers – or taxpayers where subsidies are paid – far more than an efficient competitive energy sector, with well designed regulation where it is necessary to make the markets work. . . .

The opposition’s policies are a prescription for price rises, insecure supply, and power cuts.

. . . Some people in New Zealand believe that the electricity sector cannot be competitive, and prices will always be higher than in a state owned, politically determined industry. This belief is in spite of the fact that every other sector of the economy once owned by the government (e.g. telecommunications and airlines) is now operating in competitive markets, giving consumers choice and lower prices.

How many people would want the government to monopolize air travel or telecommunications again? Competition has produced palpable benefits for consumers, and has generated tax revenue for the government, whereas in the past taxpayers had been subsidizing these sectors. . .

The Bradford reforms were criticised from all sides but  when competition was introduced in 1998-99, real electricity prices fell on average for four years. That hadn’t happened in the preceding 20-30 years of state ownership and control.

. . . Prices fell more for some consumers than others: the commercial sector, and farming had been subsidizing households for years as prices were politically determined, with the result that very high non-household power prices helped make business and farming internationally uncompetitive.

Inflation adjusted prices for local lines distribution companies fell substantially for some years after 1999, as the regulator – the Commerce Commission – forced these monopoly companies to seek cost efficiencies and only allowed a reduced rate of return on capital because of the lower commercial risks they faced compared to competitive companies.

In 2002, the then Labour government began to re-regulate the market in a series of policy moves, although they didn’t move to change the structure of the market finally established in 1998 after a decade of reform.

The overall effect of these moves was to reduce the competitive pressures on the generators. Government policies reduced the ability of companies to build low cost thermal generation (such as low emission coal fired stations). There were other pressures as well that no government could avoid e.g. the ending of low cost gas supplies from the Maui gas-field, and the addition of increasingly expensive new generation capacity as lower cost alternatives were not available (such as wind power).

The result was a 72 percent increase in inflation adjusted power prices between 2002 and 2008. This had nothing to do with the structure of the market, but was principally the result of Labour’s policy mix where the market could not find the lowest cost generation capacity and the downward pressure on electricity prices of the 1998-99 reforms was eliminated by government policy.

During this time, the government also sought higher dividends from the state owned power companies, which in turn put upward pressure on prices.

After its election in 2008, National reinstated the policy pressures on competitive producers and retailers. Consumers were encouraged to shop around for alternative electricity suppliers, just as they do for air travel, mobile phones, or petrol, with initiatives like Powershop, the What’s My Number campaign and greater transparency of pricing.

As a result, power prices have risen at a far slower rate than in the 7 years prior to 2008. Whether they can or will fall further on a sustainable basis, depends on the policies being followed by the government of the day, and perhaps more importantly on the cost of each new increment of electricity generation capacity as New Zealand has run out of “cheap” renewable energy such as hydro. . .

He has suggestions for further improvements which would make the market work better, and put pressure on the industry to deliver the lowest possible prices to consumers.

I would include the following:

  • Mandating smart meters into all electricity consumers’ premises
  • Consider removing metering from the generators and putting them in the hands of independent meter operators or lines companies
  • Improve the ability of independent retailers of electricity to provide electricity to household consumers, by removing any barriers to their ability to buy power from generators, independent retailers or the wholesale market
  • Providing a power tariff for household consumers to buy power through the wholesale market (to get the benefit of low prices when the wholesale market is over-supplied)
  • Make it easier for individuals to generate their own power and supply into the grid, with a certain, if necessary mandated, tariff payable by lines or generation companies

He identifies serious shortcomings used by the Labour and Green parties to justify their policy and concludes:

As a country we have clearly reached a fork in the road: do we continue to promote competitive measures to force competitive generators to look for lower cost solutions, together with sensible regulation on monopoly parts of the electricity sector; or do we return to the post-war model of monopoly state ownership and control, where political parties determine prices and profits?

We’ve got a choice.

There’s the LabourGreen policy which puts power in the hands of politicians and bureaucrats or National’s policy which puts the power in the hands of consumers.


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