Plan A is working

August 18, 2015

One message from CEOs last week was the government needs to form Plan B in case the dairy slump worsens.

Lisa Owen put this to Finance Minister Bill English on The Nation and he responded:

. . . We run economic policy that underpins a flexible, resilient economy, so if prices are down in one area, we would expect people to— we’ve got a set of rules that enable them to react fairly quickly to that, and we don’t try and hide the message the world is sending us, for instance, about dairy prices. And lots of other countries, they’re increasing subsidies to farmers in order to brush over and hide that price signal. So this economy will diversify if there are other markets which are willing to pay more for our products. That’s where the investment will flow. And the good news on the horizon is that the US economy is recovering. It’s the world’s largest economy. It’s showing signs of sustainable growth. And that New Zealand businesses are responding to that positively, and I don’t agree with politicians—

But, Minister, that’s your plan A. That’s your plan A. Where’s your plan B?

Plan A is a flexible, resilient economy. If plan B is about politicians sitting on the sideline deciding where hundreds of millions of investment should go next, then we’re not interested in that sort of plan B. It will fail, as it’s failed in the past.

But business people who are on the front lines – 75% of the top business minds in the Mood of the Boardroom – they want you to have a plan B. Are they wrong?

Well, I’ve asked them about what their plan B is, and none of them have a plan B. They’re certainly inviting—

Maybe they’re relying on you for plan B, Minister.

They’re certainly not inviting politicians to say, ‘Right, we’re going to shift a couple of hundred billion— a couple of hundred million of investment from industry A to industry B.’ They are backing the Government approach, which is to ensure that we keep our costs down, the Government invests in infrastructure, because no one else can do that, we work on the pipeline of skills into the labour market so there’s people there that they can employ, and they make their risky commercial investment decisions, and that’s what they’re doing right now. Right around the country, businesses will be thinking about where to direct their investment, given that dairy’s not looking so good for the next year or two; tourism, wine, ICT is all looking better for the next two or three years. And they’ll make those decisions a bit more precisely and more sensibly than government would. .  .

Plan A is what got New Zealand through the GFC and the economy growing again.

We need more of it  – lower government spending, concentrating on addressing the causes of welfare dependency, investing in education and infrastructure, opening more trade opportunities . . .

That’s the business of government and private enterprise isn’t as Mike Hosking reminds us:

What’s a bloke buying a farm got to do with the government?
What has any person setting up a business got to do with the government?
When a shop closes is it the government’s job to mop it up?
When a factory down sizes… Is the govt supposed to do something?

Dairy, like all business products and markets is beyond a government scope.

A government is there to provide over arching policy direction… Like tax and trade deals and welfare.

It’s not there to milk the cows, man the tills and set the price for commodities. . .

If the CEO’s know what’s good for them and their businesses they won’t be asking government to get involved in them.

We don’t need Plan B and we definitely don’t need government minding the business of business.

 

 

 

 


Rural round-up

October 29, 2014

TPP Too Important for Compromised Finish:

The New Zealand dairy industry is urging Trans Pacific Partnership (TPP) partners not to compromise on the quality of the deal to get it done quickly.

The Dairy Companies Association of New Zealand (DCANZ) is concerned at reports that the US and Japan may seek to conclude a deal which leaves dairy trade liberalisation out in the cold.

“We urge leaders to stand by their 2011 commitment to a comprehensive deal,” says DCANZ Chairman Malcolm Bailey. “This cannot be achieved without addressing access for dairy, which remains one of the most protected sectors amongst the TPP partner countries.”

The Japanese World Trade Organisation (WTO) bound tariffs for skim milk powder and butter are equal to 217% and 360% respectively. Canada’s dairy market access regime is characterised by small quotas and large out of quota tariffs in the order of 200 – 300%. These conditions often mean trade is prevented. . .

Lisa Owen interviews Fonterra CEO Theo Spierings

Headlines:

Fonterra boss worried about the spread of Ebola in West Africa and potential “big consequences” for the company, saying “it doesn’t feel to me like that it is under control at the moment”

Estimates if Ebola worsens, it could “very quickly” hit 5-6% of Fonterra’s exports, worth $150 million in sales.

Spierings says China as a market is “stable” – volume growth might slow to 4% from 6%

Downplays chance of sealing a Trans-Pacific trade deal – “where the world is right now, we should not be overly optimistic on reaching this… it’s going to be very difficult”.

Can envisage a day when New Zealand reaches ‘peak cow’ – “there could be a point in time that you say no more” – but not for some years. . . .

Massey to host $5m Food Safety Research Centre:

Science and Innovation Minister Steven Joyce and Food Safety Minister Jo Goodhew today announced that Massey University will host the new Food Safety Science and Research Centre.

The Centre will promote, co-ordinate, and deliver food safety science and research for New Zealand. It was a key recommendation from the Government Inquiry into the Whey Protein Concentrate (WPC) Contamination Incident.

“New Zealand’s food exports are dependent on a robust and internationally credible food safety system,” Mr Joyce says. “It is vital therefore that New Zealand is a visible leader in food safety science and research, and remains a producer of trusted, high-quality food products.” . . .

Venison: Breaking with Tradition:

Deer farmers have enjoyed better prices for their venison this October, the time of the year when chilled venison demand peaks in Europe. But the industry’s real focus is on getting chilled season prices all year-round.

Since early October the national average venison schedule for benchmark 60 kg stags has been sitting at around $7.73 a kilo, up from $7.43 last year. Some farmers have been receiving more than $8.00 a kilo.

“This is good news,” says Deer Industry NZ (DINZ) chief executive Dan Coup. “But once the last chilled season shipment to Europe departs our shores in early November, the reality is that venison prices will most likely ease again.” . . .

 

Silver Fern Farms Confirms Positive 2014, Sets 2015 Plan Including Organisational Change And Outlook:

October 28: Silver Fern Farms Chairman Rob Hewett says Silver Fern Farms is on track to deliver a significantly improved profit for the 2014 year following a strategic review of the business and a focus on debt reduction.

“We expect the audited pre-tax earnings for the company will be $5 – 7m for the year just ended to 30 September 2014, which will represent a greater than $40m net profit before tax improvement in performance on 2013. We know many of our farmer shareholders see our profitability as a priority for the company this season, which is what we have delivered,” Mr Hewett says.

Over the same period the company has also paid down $100 million in debt as part of a plan to reduce the cost of debt servicing to the company.

Mr Hewett also announced Chief Executive Keith Cooper was stepping down from the role. . . .

 

Dairy Awards Offers i-Incentive to Enter

Those that enter early in the 2015 New Zealand Dairy Industry Awards could win some great Apple Inc prizes, with more than $12,500 of products being given away in an Early Bird Entry Prize Draw.

Entries are now being accepted in the New Zealand Sharemilker/Equity Farmer of the Year, New Zealand Farm Manager of the Year and New Zealand Dairy Trainee of the Year competitions.

All entries are accepted online at www.dairyindustryawards.co.nz and close on November 30.

National Convenor Chris Keeping says the Early Bird Entry Prize Draw provides a great incentive for those planning to enter the awards to get their entry in early. There are two packages of an iPhone 5S and iPad Air worth $2100 to be won in each of the three competitions, six in total. . . .


Debate policy not specific purchase

August 3, 2014

Pure 100 Farm Limited, a local subsidiary of Shanghai Pengxin Group has signed an agreement to buy Lochinver Station between Napier and Taupo.

The Central Plateau farm acquisition is now before the Overseas Investment Office (OIO) and will then go through the Chinese regulatory approval process prior to settlement.

The Group currently owns 16 farms in the North Island and has significantly enhanced these assets. According to a Land Information New Zealand report[1], PNZFGL (another local subsidiary) has been instrumental in the re-development and improvement of the North Island farm properties it owns.

The Group plans to secure operational synergies over time with this planned farm acquisition and some of its neighbouring North Island farms.

In March this year, the Group secured a 74 per cent stake in 13 farms in the South Island and has committed to capital improvements and implementing innovative industry concepts.

The Shanghai Pengxin philosophy is to work co-operatively through its local subsidiaries within the New Zealand farming industry and support new investment and innovative opportunities, as well as productivity enhancement, sustainable farming practices, and building supply chain capability.

It didn’t take long for the usual suspects to get agitated about foreigners buying land.

Lisa Owen started the interview with Steven Joyce and Grant Robertson on the topic:

Lisa Owen: . . . I want to start with you, Mr Joyce. Ownership of assets is what makes you wealthy. So what do you think of this 18,000 hectare Lochinver Station being sold to foreigners?

Steven Joyce: What I think it it’s election time because we’re getting a sale of land, and therefore a couple of people now – it used to be just Winston; now it’s Colin Craig as well – beating the anti-foreigners drum, and I suspect we’ll see a bit more of this between now and election day. But it’s as regular as every three years that this comes up.

Grant Robertson, it’s just electioneering?

Grant Roberston: Well, no. I mean, New Zealanders are actually sick of our assets being sold off, and it’s the same for farms as it is for Steven selling off energy companies. We want to see value held by New Zealanders. We don’t get this land back once it’s sold. It’s gone.

Joyce: Well, actually you do.

Robertson: Well, no, we don’t.

Joyce: No, you do.

Robertson: And it’s New Zealanders who need to have jobs being created from assets that we own. Our message for foreign investors is if you want to come into New Zealand, help create jobs.

Joyce: That’s right.

It is right, that is one of the criteria the Overseas Investment Office must take into consideration when approving a purchase of land by foreigners.

Roberston: Build a processing plant. But we don’t want to sell off the land like this.

Mr Joyce, this is—

Joyce: Well, actually, I need to answer that, because, actually, I mean, Grant, you’re interesting there, because I haven’t seen you out protesting James Cameron’s land purchases in the Wairarapa, so I’m assuming it’s only Chinese investors.

Robertson: No, it’s not. The allegation is just wrong, Steven.

Joyce: When did you go out and oppose purchasing James Cameron?

Roberston: We’ve never opposed foreign investment that is not productive for year.

Mr Joyce, can we–?

Joyce: Give me a chance. When did you go out and actually oppose the last purchase of James Cameron’s land? Where’s the press release on that?

Robertson: We have been opposing the purchases of dairy farms by anyone, and wherever they’re from, if it’s strategic land like this—

Joyce: But this isn’t a dairy farm. You know that, don’t you? This isn’t a dairy farm. . .

Robertson: That’s right. But this is about what New Zealanders want, and New Zealanders what to control their own land.

What he’s saying is that people want to control other people’s land. this land isn’t owned by New Zealanders in general it’s owned by individuals.

Joyce: So this is not a dairy farm and this is not James Cameron, therefore you’re opposing it?

Mr Joyce, I just want to ask you about your own leader’s comments.

Joyce: He’s against Chinese investment.

Robertson: Oh, for goodness sake, Steven.

Mr Joyce—

Joyce: Little xenophobia from the Labour Party to start the day off.

Mr Joyce—

Robertson: See, this is typical of the personal politics. He doesn’t want to debate what New Zealanders want, which is to control their own future. Steven’s happy to sell off our future rather than have New Zealanders in control.

Mr Joyce. Can I ask a question please, gentlemen?

Joyce: Yeah.

Your own leader has said that he doesn’t want us becoming tenants in our own country, but isn’t this exactly what is happening under your watch?

Joyce: No, it’s not. No, look, it’s a tiny amount. It’s actually a ridiculously small amount of land than under Labour, because, actually, under Labour, the average over the last five years they were in office, 90,000 hectares a year were sold to offshore purchasers. Under National, it’s been an average of 39,000 hectares a year. So it’s ridiculous for Labour to turn around—

So that’s the point, isn’t it? More under Labour, more under National. The pie being sold off is even bigger.

Joyce: But let’s look at the real benefit of international investment, actually, because, I think, all this hysteria which Grant’s trying to stoke this morning is actually incorrect, because there’s plenty of fantastic examples of international investment in this country which has brought real benefit. For example, Whirinaki, the big forestry processer in Hawke’s Bay, owned by OG for 43 years. The investment, it hasn’t had much—

So are you happy, Mr Joyce, that an enormous amount of productive New Zealand land is going offshore?

Land, productive or not can’t go offshore regardless of who owns it.

If foreigners own it some of the profit will go overseas but only after the owners have paid all the costs of running and improving the farm and also paid tax.

Robertson: Are you going to guarantee, Steven, that when this farm is sold off, this estate is sold off, that there will be some kind of added jobs? There will be processing coming and there will be something in the economy for New Zealanders? Rather than just selling off our—

Joyce: That’s one of the criteria that we put in in 2010, so absolutely.

Robertson: And you have not stuck to that.

Joyce: We have absolutely stuck to that.

Gentlemen, excuse me. We’ve spoken to sources at Tuwharetoa and other iwi who said this farm was outside of their price bracket. $70 million. So I’m interested to know where are the New Zealanders who are wealthy enough to buy our own assets? Isn’t that part of the problem?

Joyce: Well, actually, there’s plenty of New Zealanders that are wealthy enough to buy our own assets, but, look, the point of view is international investment is very important to New Zealand. It’s been very important all the way through, and it’s important to our future. And there are plenty of examples. I was actually at one the other day. Frucor, which is now owned by Suntory, a Japanese company, and they’re making big investments in their processing plant, and all the workers are in favour of that. Now, if you take the example of this particular company, Shanghai Pengxin, they have made investments in the older Crafar farms. Nobody, I think, is arguing that the Crafar farms used to be well-run. My understanding is there’s been some good investments out of that and more investments expected. So that’s all good stuff. There has to be a benefit to New Zealand—

Robertson: What Steven fails to understand here is that New Zealanders are completely sick of seeing their land sold off. This is about our lands and our future. Steven, the thing is we have learned our lesson.

I want to ask you—Mr Robertson, the Labour Party—No, no, let me—

Robertson: Steven Joyce refuses to learn the lesson that New Zealanders want land retained in New Zealand ownership.

Labour plans to stop foreign purchases. People who are not living in New Zealand, under Labour, would only be allowed to buy up to 5 hectares of land. So, would you stop the sale of this farm?

Robertson: Our criteria would definitely mean that a sale like this would be highly unlikely, unless—

Highly unlikely isn’t a no, it’s another yeah-nah answer from Labour which knows there are benefits from foreign ownership, which is why it allowed sales to go through when it was last in power.

Paul Walker makes some good points on this issue:

For efficiency reasons we want resources to be in the hands of those who value them most highly and the way to do that is sell them to the highest bidder. We want land (and other resources) to be used in the most efficient manner and the country of origin of the buyer is irrelevant to this. A thought experiment: ask yourself, Why are auctions used for so many goods? Its a way of finding out who values the good most highly. Whoever bids the most gets the goods. This is how we maximise the probability of getting an efficient allocation of resources. Secondly would a Labour government compensate the seller of the land for their policy? Under the Labour policy the seller would be forced to sell their land at a lower price than they would otherwise get (or not sell at all) and would a Labour government make up the difference between the actual sale price and the highest possible price? And if not, Why should the seller receive a lower return than they otherwise would?. And if this is a good policy for land why not implement it for other goods as well? What makes this idea land specific?

What makes land specific is emotion.

When PGG Whritghtson was purchased by a Chinese company no-one made a fuss about that yet the intellectual property that went with it in seed development may well have been more valuable than thousands of hectares of land.

But most of the fuss over foreign ownership of land is emotional.

It doesn’t take into account the benefits to the sellers and the country nor is it based on complete understanding of the area involved.

The issue is a hot-button one and should be debated.

But the debate should be on the big picture of how much land in foreign ownership is acceptable and any policy changes needed to ensure that. It shouldn’t be based on individual purchases, especially when it looks like at least some of the opposition is based on xenophobia.


Politics Daily

June 8, 2014

While I link to a range of news stories, the blogs I link to are usually from the centre to the bluer end of the political spectrum or the more reasonable or witty bits of the pink to red end.

You’re welcome to leave links to other news and blogs in comments.

John Banks

Colin Espiner @ Sunday Star Times – Banks’ public fall from grace

Southland Times – The plank must look pretty good

Grant Shimmin @ Timaru Herald – Banks situation a right mess

Dominion Post – Hard lessons for all in Banks verdict

Inventory 2 @ Keeping Stock – Tweet of the Day – 8 June 2014

David Farrar @ Kiwiblog – Geddis on Banks

Michael Cummings @ Manawatu Standard – Stench of corruption may affect election

Rodney  Hide @ NZ Herald – They’re all winners more or less

Kerre McIvor @ NZ Herald – Shame sticks to both sides of this episode

Sunday star Times – Laughing all the way to the Banks

Labour Party

Chris Trotter @ Bowalley Road – The right divide

Election

Jon Sergeant @ Taranaki Daily News – Bad pre-election policy from Left

TV3 – Lisa Owen interviews Epsom candidates

Mike Williams @ NZ Herald – Higher voter turnout could topple Nats

Cameron Slater @ Whale Oil – Mark or Mike? Doesn’t really matter the missing million isn’t really a million or missing

Cameron Slater @ Wahle Oil – Labour’s former general secretary isn’t hopeful for Labour

Economic Development

TV3 –  Lisa Owen interviews Steven Joyce

IMP

John Weekes @ NZ Herald – Dotcom to stand for parliament in 2017

David Farrar @ Kiwiblog – Dotcom wants citizenship so he can then become an MP

Inventory 2 @ Keeping Stock – Citizen Kim – yeah right

Cameron Slater @ Whale Oil – Never going to happen

Other

Andrea Vance @ Sunday Star Times – What’s the real deal on the theories

Beehive – New Akaroa Marine Reserve opened
Minister of Conservation, Nick Smith, opened our newest marine reserve in Akaroa Harbour today. https://www.national.org.nz/news/news/media-releases/detail/2014/06/08/new-akaroa-marine-reserve-opened
Matthew Beveridge – Leaving on a plane

Cameron Slater @ Whale Oil – Nashy’s pimped poor person makes the news, is a Mob associate and owns a pitbull

Steve Braunias @ Sunday Star Times – Secret diary of . . .  Julian Assange

David Farrar – Kiwiblog – Adult Community Education

TV1 – ACT Campaign Manager Richard Prebble on TV1’s Q+A


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