Jul 2009
July Edition of Jim's E-News
28/07/09 12:00 Filed in: Newsletters
The economic situation
Since my last E-news, we have seen a consistent rise in unemployment. As I suspected, the National Party has no plan and no meaningful ideas for creating a more job rich economy. Its approach is to stand on the sidelines and hope the economy turns the corner on its own.
Progressives have a better idea.
We support proactive partnerships between government and industry to invest in job rich, high-skill and innovative initiatives, especially in the regions of New Zealand.
We want to use the strength of government to invest in infrastructure, and skills training so that we create jobs and emerge from the tough global conditions stronger.
National got into office with promises it couldn’t keep
When you think about it - National was elected on a lot of promises it hasn’t been able to keep:
For now the National government is getting by on smiles and slogans. New Zealanders are giving them the benefit of the doubt - and that’s not surprising. We all want New Zealand to succeed.
Sooner or later, though, National will have to answer why they haven’t been able to come up with any meaningful ideas to solve the problems New Zealand faces.
Membership of the Labour Party
Recently I wrote to Progressive Party members to say the Progressive Party executive had decided to work closely with Labour as a coalition partner in Opposition.
Working with Labour is the best way we can keep a long term presence for Progressive ideas in the mainstream of New Zealand politics.
Our work together in Opposition has been fruitful. For example, we worked alongside our Labour colleagues on the Mt Albert by-election. This was a great success for the Opposition, and the first time since the last election that the Opposition has shown we can be more popular than the government.
Some members of the Progressive Party who have been working with Labour on campaigns have been invited to hold office in branches. Some working on campaigns want to have the same rights of membership as other campaign workers.
I discussed this with Labour’s New Zealand Council recently. In recognition, it made a decision recognising that membership of the Progressive Party is not incompatible with membership of the Labour Party.
This recognition will allow Progressive members to work cooperatively for the election of Labour candidates, who have compatible ideas and goals and to seek selection for office, or support progressive members seeking selection. It also allows those members of the Progressive Party who don’t want to join with Labour the choice to simply remain members of the Progressives.
Banks have questions to answer
The Labour Party, the Progressives and the Greens have announced they are holding the equivalent of a parliamentary select inquiry into bank profits.
Banks are charging interest rates that are higher than the same banks charge in Australia. I am supporting the cross-party inquiry because the banks have questions to answer about why there is a difference in the rates they charge.
Overseas-owned banks took $11.7 billion out of New Zealand last year in interest and profits. That’s more than the entire sum collected in GST revenue. The amount they have been paying themselves has increased rapidly over the last three or four years.
Interest rates charged by the overseas banks are especially affecting farmers.
Total farm debt at the moment is around $43 billion. At farm lending rates of 13-14 per cent that means our farmers have to pay $5.5-6 billion a year in interest alone to the Australian banks.
Every one per cent of interest charged represents $450 million off the bottom line of New Zealand’s farms. The Australian banks charge interest on unsecured loans of 17.95%, compared to 16.9% charged by Kiwibank. Interest on a standard Westpac credit card is 19.45%. In Australia, the comparable interest rate charged on a standard Westpac card is 17.74%. Australia has a higher official cash rate than we do. Kiwibank is able to charge 12.9% on its standard credit cards.
An inquiry will help to establish why Aussie banks charge us more than they charge Australians.
Feds’ concern over interest rates a topic for bank inquiry
Contact between Federated Farmers and banks over high interest rates for farm lending is welcome, and farmers should bring their concerns to the multi-party inquiry.
Federated farmers says its economists calculate that floating rates account for about $6.6 billion of the $45 billion of rural debt and “floating” mortgage rates are higher than they could be.
Three parliamentary parties, Labour, Greens and the Progressives are holding an inquiry on the topic and I want banks to front up and answer farmers’ concerns.
Banks need to explain why their interest rates haven’t come down as fast as the Reserve Bank has been bringing down the official cash rate that banks pay the Reserve Bank for their deposits. Not even the Governor of the Reserve bank can understand why they are not reducing their rates.
Farmers are the backbone of the economy, and the pressure high interest rates are causing farmers is pressure on New Zealand’s entire economic development.
‘Expert’ slams Interest Rates Inquiry
Massey University Centre for Banking Studies director, David Tripe, reflecting on the banking inquiry announced by Labour, the Progressives and the Greens, has said it should not be taken seriously and the banks are being treated as scapegoats. He goes on to say that “blaming banks is a sport that has been under way for a long time. You blame the banks for all sorts of things but who cares about facts. Banks are big and anonymous; they appear to have lots of money, so why not blame them if something is wrong?” Is this the same David Tripe who was a constant and vociferous critic of Kiwibank saying it would never work! He is at least quiet on that front these days.
Hollow promises
The ‘Rural News’ has picked up on the proposal “to cut 60 frontline biosecurity staff from already overstretched border security contingent – the axe is ultimately in (Minister David) Carter’s hands… When in opposition the (National) party repeatedly harangued then Minister Jim Anderton for neglecting the biosecurity portfolio as successive costly incursions side-stepped New Zealand’s beleaguered border defences.”
Treasury claims about privatisation boosting productivity
Treasury’s claim that privatisation boosts productivity is an old song that Treasury should be embarrassed about.
Treasury made the exact same claim about the privatisation of rail. It could not have been more wrong. The privatisation of rail was a disaster on any reasonable measure.
In parliament last week, I tabled Treasury’s 1999 report “The Privatisation of New Zealand Rail.”
In the report, produced when Bill English was finance minister, Treasury claimed, “welfare increased from the privatisation of rail. This reflects the remarkable improvement in productivity that took place.”
Treasury has long made a habit of calling for the same medicine regardless of the facts. When the facts showed Treasury’s advice about privatising rail was hopelessly wrong, they made up a case that said it was great anyway! You can’t beat this for poor quality advice. If Treasury was a doctor, the patient would be dead.
In an ironic twist on Treasury’s call for other government departments to contract out more work, the discredited rail report was produced under contract for Treasury.
Fitch warning a wake up on bank profits
Warnings of a credit downgrade because of our current account deficit are a wake up call about the sums we are paying foreign banks in interest and profit to fund the deficit.
The Fitch rating agency warns that New Zealand has a fifty-fifty chance of a credit downgrade because the current account is very high. Unless it halves, we will be downgraded, and households, farmers and businesses will have to pay higher interest rates.
As I have been saying for a long time, the external deficit is already costing New Zealand too much. We sent $11.7 billion in interest and profit to overseas-owned banks last year, more than the government collected in GST revenue. Farmers alone are paying interest of around six billion dollars in farm debt.
Interest rates charged here by the Australian-owned banks are higher than the same banks charge in Australia. Their margins are also higher.
We are sending that money to the overseas-owned banks because they are financing the current account deficit. When house prices rose, New Zealanders borrowed against the capital, bought new plasma TVs, but didn’t increase our capacity to earn more.
Now the bill is starting to come in. Current account deficits have a history of reversing themselves sharply, with very sudden falls in consumption. That amounts to a poor outlook when the government is already hoping the recession will end by itself.
Unfortunately the government doesn’t have any economic plans to reduce the current account deficit and it doesn’t even recognise the levels of profits going to overseas-owned banks are a problem.
Rogernomics was meant to end the current account deficit problem for ever. It failed abysmally.
How to reduce prison populations
There are too many people in prison and the Chief Justice is right to raise the issue.
But the only viable way to reduce prison overcrowding is to reduce the level of crime by targeting drugs and alcohol. Longer prison sentences are not making much difference.
The Chief Justice’s comments are the latest of a flurry this year looking at the justice system: Pita Sharples wants to build special Maori prisons for Maori offenders. The government wants to build prisons out of shipping containers. The next step will be putting containers on a container ship and shipping them offshore.
All of these ideas are looking at the wrong end of the problem. Early intervention works best and costs less. If you intervene early, you don’t have as many victims, and you don’t need to worry about locking people up or letting them out.
Three out of five offences are committed while the offender is under the influence of alcohol. If you want to cut crime, you can’t go past that figure.
The government made big promises about significantly cutting serious offending. It won’t keep that promise, because it won’t do anything about the most common factor in criminal offending.
Reducing the abuse of alcohol is a tough issue to fix. Until it is fixed, crime rates will remain high, more prisons will be built in local neighbourhoods, we will pay higher taxes to build them, they will continue to be overcrowded and they will continue to fail.
All talk and no jobs
National is talking big about agriculture, but it’s running up a surrender flag with no new ideas.
John Key billed a recent speech as a major statement on the economy, but he had no new ideas while unemployment is increasing.
Unemployment in a region like Gisborne increased from 3.8% in 2006 to 7.8% in March this year and it will be inevitably higher now. Yet while unemployment is rising quickly in regional New Zealand, National has no ministry or policy for regional development or industry development. They never did and they don’t have now.
National imposed a massive tax increase on research and development and it cancelled a two-billion dollar partnership between the government and private sector to invest in primary sector innovation.
While John Key talks about the economic performance of agriculture, he has no idea about why our farms, businesses and homeowners are paying much higher interest rates than Australians, when the same banks are doing the lending. John Key is all talk and no jobs.
Complaints over secret agreements with water in Auckland
An attempt to hold negotiations over Auckland’s water services in secret might be a breach of the law. I am going to the Ombudsman and Auditor-General with complaints over a ‘confidentiality agreement’ Watercare has tried to make Auckland councils sign. The agreement would stop councils from disclosing any details about the transfer of water businesses to Watercare.
The agreement appears to be an attempt to thwart the law around official information - in particular the Local Government Official Information and Meetings Act 1987. It provides the only grounds councils can use to restrict disclosure of information. It also provides for redress through the Ombudsman.
The ‘confidentiality agreement’ has the whiff of darkness about it. There should be nothing in the transfer of the water business of councils that can’t be dealt with through the official information statutes. The important protection for the public is that officials can’t use our money without being accountable to the public. If there are public interest grounds for withholding information, then those grounds are subject to simple review by the Ombudsman.
Therefore the attempt to override the statute with a secrecy deal appears to be sinister. You can’t use public money for unlawful purposes. Thwarting an Act of parliament is unlawful. Any public money used to write this agreement or negotiate it will have to be paid back. Any lawyers involved should be thinking about refunding their fees.
What we are seeing repeatedly from the national government and its henchmen in Auckland is a highly undemocratic tendency towards taxation without representation.
First, the public’s right to vote on Auckland was blocked by Act of parliament, passed under urgency. Now the public’s right to know what is happening to our assets is being blocked.
Since my last E-news, we have seen a consistent rise in unemployment. As I suspected, the National Party has no plan and no meaningful ideas for creating a more job rich economy. Its approach is to stand on the sidelines and hope the economy turns the corner on its own.
Progressives have a better idea.
We support proactive partnerships between government and industry to invest in job rich, high-skill and innovative initiatives, especially in the regions of New Zealand.
We want to use the strength of government to invest in infrastructure, and skills training so that we create jobs and emerge from the tough global conditions stronger.
National got into office with promises it couldn’t keep
When you think about it - National was elected on a lot of promises it hasn’t been able to keep:
- They promised wages in New Zealand would catch up to wages in Australia; They have no plan to boost wages.
- They promised a three year program of tax cuts; we always said their promise was unaffordable.
- They told New Zealanders the previous government gave too much of the Foreshore and Seabed to Maori; Now they say we should have handed it all over.
- They claimed they would significantly reduce violent crime; They haven’t, and they have voted down any effort to reduce the availability of the one factor that is present in over sixty percent of all offences: Alcohol.
For now the National government is getting by on smiles and slogans. New Zealanders are giving them the benefit of the doubt - and that’s not surprising. We all want New Zealand to succeed.
Sooner or later, though, National will have to answer why they haven’t been able to come up with any meaningful ideas to solve the problems New Zealand faces.
Membership of the Labour Party
Recently I wrote to Progressive Party members to say the Progressive Party executive had decided to work closely with Labour as a coalition partner in Opposition.
Working with Labour is the best way we can keep a long term presence for Progressive ideas in the mainstream of New Zealand politics.
Our work together in Opposition has been fruitful. For example, we worked alongside our Labour colleagues on the Mt Albert by-election. This was a great success for the Opposition, and the first time since the last election that the Opposition has shown we can be more popular than the government.
Some members of the Progressive Party who have been working with Labour on campaigns have been invited to hold office in branches. Some working on campaigns want to have the same rights of membership as other campaign workers.
I discussed this with Labour’s New Zealand Council recently. In recognition, it made a decision recognising that membership of the Progressive Party is not incompatible with membership of the Labour Party.
This recognition will allow Progressive members to work cooperatively for the election of Labour candidates, who have compatible ideas and goals and to seek selection for office, or support progressive members seeking selection. It also allows those members of the Progressive Party who don’t want to join with Labour the choice to simply remain members of the Progressives.
Banks have questions to answer
The Labour Party, the Progressives and the Greens have announced they are holding the equivalent of a parliamentary select inquiry into bank profits.
Banks are charging interest rates that are higher than the same banks charge in Australia. I am supporting the cross-party inquiry because the banks have questions to answer about why there is a difference in the rates they charge.
Overseas-owned banks took $11.7 billion out of New Zealand last year in interest and profits. That’s more than the entire sum collected in GST revenue. The amount they have been paying themselves has increased rapidly over the last three or four years.
Interest rates charged by the overseas banks are especially affecting farmers.
Total farm debt at the moment is around $43 billion. At farm lending rates of 13-14 per cent that means our farmers have to pay $5.5-6 billion a year in interest alone to the Australian banks.
Every one per cent of interest charged represents $450 million off the bottom line of New Zealand’s farms. The Australian banks charge interest on unsecured loans of 17.95%, compared to 16.9% charged by Kiwibank. Interest on a standard Westpac credit card is 19.45%. In Australia, the comparable interest rate charged on a standard Westpac card is 17.74%. Australia has a higher official cash rate than we do. Kiwibank is able to charge 12.9% on its standard credit cards.
An inquiry will help to establish why Aussie banks charge us more than they charge Australians.
Feds’ concern over interest rates a topic for bank inquiry
Contact between Federated Farmers and banks over high interest rates for farm lending is welcome, and farmers should bring their concerns to the multi-party inquiry.
Federated farmers says its economists calculate that floating rates account for about $6.6 billion of the $45 billion of rural debt and “floating” mortgage rates are higher than they could be.
Three parliamentary parties, Labour, Greens and the Progressives are holding an inquiry on the topic and I want banks to front up and answer farmers’ concerns.
Banks need to explain why their interest rates haven’t come down as fast as the Reserve Bank has been bringing down the official cash rate that banks pay the Reserve Bank for their deposits. Not even the Governor of the Reserve bank can understand why they are not reducing their rates.
Farmers are the backbone of the economy, and the pressure high interest rates are causing farmers is pressure on New Zealand’s entire economic development.
‘Expert’ slams Interest Rates Inquiry
Massey University Centre for Banking Studies director, David Tripe, reflecting on the banking inquiry announced by Labour, the Progressives and the Greens, has said it should not be taken seriously and the banks are being treated as scapegoats. He goes on to say that “blaming banks is a sport that has been under way for a long time. You blame the banks for all sorts of things but who cares about facts. Banks are big and anonymous; they appear to have lots of money, so why not blame them if something is wrong?” Is this the same David Tripe who was a constant and vociferous critic of Kiwibank saying it would never work! He is at least quiet on that front these days.
Hollow promises
The ‘Rural News’ has picked up on the proposal “to cut 60 frontline biosecurity staff from already overstretched border security contingent – the axe is ultimately in (Minister David) Carter’s hands… When in opposition the (National) party repeatedly harangued then Minister Jim Anderton for neglecting the biosecurity portfolio as successive costly incursions side-stepped New Zealand’s beleaguered border defences.”
- Quotes from National in opposition:
June 6, 2006: “National takes issue with Anderton’s ‘confidence’. Says: National: “Our borders are vulnerable; The Minister needs to fix it and fix it now.” - February 21 2007: National disputes Anderton’s claims we have “the best biosecurity system in the world”, arguing instead that we are actually losing the battle against organisms entering New Zealand.
- November 4, 2008: National claims if it were in Government it “would introduce a range of measures to ensure pest incursions did not threaten New Zealand’s competitive agricultural advantage. There’s no doubt we need stronger border controls and National will make changes to do that.”
- And finally:
April 7, 2009: From Minister Carter – “I’m the Minister responsible so it’s up to me to be providing that leadership. I’ve spoken to the people at MAF responsible for biosecurity and they have accepted things need to change.” - July 7 2009: MAF announces moves to disestablish 60 border security positions.
Treasury claims about privatisation boosting productivity
Treasury’s claim that privatisation boosts productivity is an old song that Treasury should be embarrassed about.
Treasury made the exact same claim about the privatisation of rail. It could not have been more wrong. The privatisation of rail was a disaster on any reasonable measure.
In parliament last week, I tabled Treasury’s 1999 report “The Privatisation of New Zealand Rail.”
In the report, produced when Bill English was finance minister, Treasury claimed, “welfare increased from the privatisation of rail. This reflects the remarkable improvement in productivity that took place.”
Treasury has long made a habit of calling for the same medicine regardless of the facts. When the facts showed Treasury’s advice about privatising rail was hopelessly wrong, they made up a case that said it was great anyway! You can’t beat this for poor quality advice. If Treasury was a doctor, the patient would be dead.
In an ironic twist on Treasury’s call for other government departments to contract out more work, the discredited rail report was produced under contract for Treasury.
Fitch warning a wake up on bank profits
Warnings of a credit downgrade because of our current account deficit are a wake up call about the sums we are paying foreign banks in interest and profit to fund the deficit.
The Fitch rating agency warns that New Zealand has a fifty-fifty chance of a credit downgrade because the current account is very high. Unless it halves, we will be downgraded, and households, farmers and businesses will have to pay higher interest rates.
As I have been saying for a long time, the external deficit is already costing New Zealand too much. We sent $11.7 billion in interest and profit to overseas-owned banks last year, more than the government collected in GST revenue. Farmers alone are paying interest of around six billion dollars in farm debt.
Interest rates charged here by the Australian-owned banks are higher than the same banks charge in Australia. Their margins are also higher.
We are sending that money to the overseas-owned banks because they are financing the current account deficit. When house prices rose, New Zealanders borrowed against the capital, bought new plasma TVs, but didn’t increase our capacity to earn more.
Now the bill is starting to come in. Current account deficits have a history of reversing themselves sharply, with very sudden falls in consumption. That amounts to a poor outlook when the government is already hoping the recession will end by itself.
Unfortunately the government doesn’t have any economic plans to reduce the current account deficit and it doesn’t even recognise the levels of profits going to overseas-owned banks are a problem.
Rogernomics was meant to end the current account deficit problem for ever. It failed abysmally.
How to reduce prison populations
There are too many people in prison and the Chief Justice is right to raise the issue.
But the only viable way to reduce prison overcrowding is to reduce the level of crime by targeting drugs and alcohol. Longer prison sentences are not making much difference.
The Chief Justice’s comments are the latest of a flurry this year looking at the justice system: Pita Sharples wants to build special Maori prisons for Maori offenders. The government wants to build prisons out of shipping containers. The next step will be putting containers on a container ship and shipping them offshore.
All of these ideas are looking at the wrong end of the problem. Early intervention works best and costs less. If you intervene early, you don’t have as many victims, and you don’t need to worry about locking people up or letting them out.
Three out of five offences are committed while the offender is under the influence of alcohol. If you want to cut crime, you can’t go past that figure.
The government made big promises about significantly cutting serious offending. It won’t keep that promise, because it won’t do anything about the most common factor in criminal offending.
Reducing the abuse of alcohol is a tough issue to fix. Until it is fixed, crime rates will remain high, more prisons will be built in local neighbourhoods, we will pay higher taxes to build them, they will continue to be overcrowded and they will continue to fail.
All talk and no jobs
National is talking big about agriculture, but it’s running up a surrender flag with no new ideas.
John Key billed a recent speech as a major statement on the economy, but he had no new ideas while unemployment is increasing.
Unemployment in a region like Gisborne increased from 3.8% in 2006 to 7.8% in March this year and it will be inevitably higher now. Yet while unemployment is rising quickly in regional New Zealand, National has no ministry or policy for regional development or industry development. They never did and they don’t have now.
National imposed a massive tax increase on research and development and it cancelled a two-billion dollar partnership between the government and private sector to invest in primary sector innovation.
While John Key talks about the economic performance of agriculture, he has no idea about why our farms, businesses and homeowners are paying much higher interest rates than Australians, when the same banks are doing the lending. John Key is all talk and no jobs.
Complaints over secret agreements with water in Auckland
An attempt to hold negotiations over Auckland’s water services in secret might be a breach of the law. I am going to the Ombudsman and Auditor-General with complaints over a ‘confidentiality agreement’ Watercare has tried to make Auckland councils sign. The agreement would stop councils from disclosing any details about the transfer of water businesses to Watercare.
The agreement appears to be an attempt to thwart the law around official information - in particular the Local Government Official Information and Meetings Act 1987. It provides the only grounds councils can use to restrict disclosure of information. It also provides for redress through the Ombudsman.
The ‘confidentiality agreement’ has the whiff of darkness about it. There should be nothing in the transfer of the water business of councils that can’t be dealt with through the official information statutes. The important protection for the public is that officials can’t use our money without being accountable to the public. If there are public interest grounds for withholding information, then those grounds are subject to simple review by the Ombudsman.
Therefore the attempt to override the statute with a secrecy deal appears to be sinister. You can’t use public money for unlawful purposes. Thwarting an Act of parliament is unlawful. Any public money used to write this agreement or negotiate it will have to be paid back. Any lawyers involved should be thinking about refunding their fees.
What we are seeing repeatedly from the national government and its henchmen in Auckland is a highly undemocratic tendency towards taxation without representation.
First, the public’s right to vote on Auckland was blocked by Act of parliament, passed under urgency. Now the public’s right to know what is happening to our assets is being blocked.
Feds’ concern over interest rates a topic for bank inquiry Feds’ concern over interest rates a topic for bank inquiry
22/07/09 11:40 Filed in: News Releases
Contact between Federated Farmers and banks over high interest rates for farm lending is welcome, and farmers should bring their concerns to the multi-party inquiry, Opposition agriculture spokesperson Jim Anderton says.
Federated farmers says its economists calculate that floating rates account for about $6.6 billion of the $45 billion of rural debt and “floating mortgage rates are higher than they could be.”
Three parliamentary parties, Labour, Greens and the progressives are holding an inquiry on the topic and Jim Anderton wants banks to front up and answer farmers’ concerns.
“Banks need to explain why their interest rates haven’t come down as fast as the Reserve Bank has been bringing down the official cash rate that banks pay the Reserve Bank for their deposits. Not even the Governor of the Reserve bank can understand why they are not reducing their rates.
“Farmers are the backbone of the economy, and the pressure high interest rates are causing farmers is pressure on New Zealand’s entire economic development.”
Federated farmers says its economists calculate that floating rates account for about $6.6 billion of the $45 billion of rural debt and “floating mortgage rates are higher than they could be.”
Three parliamentary parties, Labour, Greens and the progressives are holding an inquiry on the topic and Jim Anderton wants banks to front up and answer farmers’ concerns.
“Banks need to explain why their interest rates haven’t come down as fast as the Reserve Bank has been bringing down the official cash rate that banks pay the Reserve Bank for their deposits. Not even the Governor of the Reserve bank can understand why they are not reducing their rates.
“Farmers are the backbone of the economy, and the pressure high interest rates are causing farmers is pressure on New Zealand’s entire economic development.”
Treasury claims about privatisation boosting productivity
21/07/09 11:48 Filed in: News Releases
Treasury’s claim that privatisation boosts productivity is an old song that Treasury should be embarrassed about, Progressive Wigram MP Jim Anderton says.
“Treasury made the exact same claim about the privatisation of rail. It could not have been more wrong. The privatisation of rail was a disaster on any reasonable measure.”
Jim Anderton tabled in parliament Treasury’s 1999 report “The Privatisation of New Zealand Rail.”
In the report, produced when Bill English was finance minister, Treasury claimed, “welfare increased from the privatisation of rail. This reflects the remarkable improvement in productivity that took place.”
“Treasury has long made a habit of calling for the same medicine regardless of the facts. When the facts showed Treasury’s advice about privatising rail was hopelessly wrong, they made up a case that said it was great anyway! You can’t beat this for poor quality advice. If Treasury was a doctor, the patient would be dead.
In an ironic twist on Treasury’s call for other government departments to contract out more work, the discredited rail report was produced under contract for Treasury.
Banks have questions to answer
21/07/09 11:46 Filed in: News Releases
Banks are charging interest rates in New Zealand that are higher than the same banks charge in Australia, Progressive Wigram MP Jim Anderton says.
He is supporting a cross-party inquiry into bank profits, because he says the banks have questions to answer about why there is a difference in the rates they charge.
“Overseas-owned banks took $11.7 billion out of New Zealand last year in interest and profits. That’s more than the entire sum collected in GST revenue. The amount they have been paying themselves has increased rapidly over the last three or four years.
“Interest rates charged by the overseas banks are especially affecting farmers.
“Total farm debt at the moment is around $43 billion. At farm lending rates of 13-14 per cent, that means our farmers are having to pay $5.5-6 billion a year in interest alone to the Australian banks.
“Every one per cent of interest charged represents $450 million off the bottom line of New Zealand’s farms.
“The Australian banks charge interest on unsecured loans of 17.95%, compared to 16.9% charged by Kiwibank.
“Interest on a standard Westpac credit card is 19.45%. In Australia, the comparable interest rate charged on a standard Westpac card is 17.74%. Australia has a higher official cash rate than we do. Kiwibank is able to charge 12.9% on its standard credit cards.
“An inquiry will help to establish why Aussie banks charge us more than they charge Australians.”
How to reduce prison populations
17/07/09 11:51 Filed in: News Releases
There are too many people in prison and the Chief Justice is right to raise the issue, Progressive Wigram MP Jim Anderton says.
But he says the only viable way to reduce prison overcrowding is to reduce the level of crime by targeting drugs and alcohol.
“Longer prison sentences are not making much difference.
“The Chief Justice’s comments are the latest of a flurry this year looking at the justice system: Pita Sharples wants to build special Maori prisons for Maori offenders. The government wants to build prisons out of shipping containers. The next step will be putting containers on a container ship and shipping them offshore.
“All of these ideas are looking at the wrong end of the problem. Early intervention works best and costs less.
“If you intervene early, you don’t have as many victims, and you don’t need to worry about locking people up or letting them out.
“Three out of five offences are committed while the offender is under the influence of alcohol. If you want to cut crime, you can’t go past that figure.
“The government made big promises about significantly cutting serious offending. It won’t keep that promise, because it won’t do anything about the most common factor in criminal offending.
“Reducing the abuse of alcohol is a tough issue to fix. Until it is fixed, crime rates will remain high, more prisons will be built in local neighbourhoods, we will pay higher taxes to build them, they will continue to be overcrowded and they will continue to fail.”
But he says the only viable way to reduce prison overcrowding is to reduce the level of crime by targeting drugs and alcohol.
“Longer prison sentences are not making much difference.
“The Chief Justice’s comments are the latest of a flurry this year looking at the justice system: Pita Sharples wants to build special Maori prisons for Maori offenders. The government wants to build prisons out of shipping containers. The next step will be putting containers on a container ship and shipping them offshore.
“All of these ideas are looking at the wrong end of the problem. Early intervention works best and costs less.
“If you intervene early, you don’t have as many victims, and you don’t need to worry about locking people up or letting them out.
“Three out of five offences are committed while the offender is under the influence of alcohol. If you want to cut crime, you can’t go past that figure.
“The government made big promises about significantly cutting serious offending. It won’t keep that promise, because it won’t do anything about the most common factor in criminal offending.
“Reducing the abuse of alcohol is a tough issue to fix. Until it is fixed, crime rates will remain high, more prisons will be built in local neighbourhoods, we will pay higher taxes to build them, they will continue to be overcrowded and they will continue to fail.”
Fitch warning a wake up on bank profits.
17/07/09 11:50 Filed in: News Releases
Warnings of a credit downgrade because of our current account deficit are a wake up call about the sums we are paying foreign banks in interest and profit to fund the deficit, Progressive Wigram MP Jim Anderton says.
The Fitch rating agency warns that New Zealand has a fifty-fifty chance of a credit downgrade because the current account is very high. Unless it halves, we will be downgraded, and households, farmers and businesses will have to pay higher interest rates.
Jim Anderton says the external deficit is already costing New Zealand too much.
“We sent $11.7 billion in interest and profit to overseas-owned banks last year, more than the government collected in GST revenue. Farmers alone are paying interest of around six billion dollars in farm debt.
“Interest rates charged here by the Australian-owned banks are higher than the same banks charge in Australia. Their margins are higher.
“We are sending that money to the overseas-owned banks because they are financing the current account deficit. When house prices rose, New Zealanders borrowed against the capital, bought new plasma tvs, but didn’t increase our capacity to earn more.
“Now the bill is starting to come in.
“Current account deficits have a history of reversing themselves sharply, with very sudden falls in consumption. That amounts to a poor outlook when the government is already hoping the recession will end by itself.
“Unfortunately the government doesn’t have any economic plans to reduce the current account deficit and it doesn’t even recognise the level of profits going to overseas-owned banks are a problem.
“Rogernomics was meant to end the current account deficit problem for ever. It failed abysmally.”
All talk and no jobs
15/07/09 11:53 Filed in: News Releases
National is talking big about agriculture, but it’s running up a surrender flag with no new ideas, Opposition agriculture spokesperson Jim Anderton says.
“Today John Key billed his speech as a major statement on the economy, but he had no new ideas while unemployment is increasing.
“Unemployment in a region like Gisborne increased from 3.8% in 2006 to 7.8% in March this year and it will be inevitably higher now. Yet while unemployment is rising quickly in regional New Zealand, National has no ministry or policy for regional development or industry development. They never did and they don’t have now.
“National imposed a massive tax increase on research and development and it cancelled a two-billion dollar partnership between the government and private sector to invest in primary sector innovation.
“While John Key talks about the economic performance of agriculture, he has no idea about why our farms, businesses and homeowners are paying much higher interest rates than Australians, when the same banks are doing the lending.
“John Key is all talk and no jobs,” Jim Anderton said.
Complaints over secret agreements
13/07/09 11:57 Filed in: News Releases
An attempt to hold negotiations over Auckland’s water services in secret might be a breach of the law, Progressive Wigram MP Jim Anderton says.
He is going to the Ombudsman and Auditor-General with complaints over a ‘confidentiality agreement’ Watercare has tried to make Auckland councils sign. The agreement would stop councils from disclosing any details about the transfer of water businesses to Watercare.
Jim Anderton says the agreement appears to be an attempt to thwart the law around official information - in particular the Local Government Official Information and Meetings Act 1987. It provides the only grounds councils can use to restrict disclosure of information. It also provides for redress through the Ombudsman.
“The ‘confidentiality agreement’ has the whiff of darkness about it.
“There should be nothing in the transfer of the water business of councils that can’t be dealt with through the official information statutes. The important protection for the public is that officials can’t use our money without being accountable to the public. If there are public interest grounds for withholding information, then those grounds are subject to simple review by the Ombudsman.
“Therefore the attempt to override the statute with a secrecy deal appears to be sinister.
“You can’t use public money for unlawful purposes. Thwarting an Act of parliament is unlawful. Any public money used to write this agreement or negotiate it will have to be paid back. Any lawyers involved should be thinking about refunding their fees.
“What we are seeing repeatedly from the national government and its henchmen in Auckland is a highly undemocratic tendency towards taxation without representation.
“First, the public’s right to vote on Auckland was blocked by Act of parliament, passed under urgency. Now the public’s right to know what is happening to our assets is being blocked.”
Why do Aussie banks charge us more than they charge Australians?
07/07/09 12:04 Filed in: News Releases
Interest rates charged by the big Australian banks are not only higher than the rates charged by New Zealand’s own bank - they’re higher than the rates the Aussies charge themselves, Progressive Wigram MP Jim Anderton says.
“Floating interest rates on mortgages are far too high. But interest rates on credit cards, unsecured lending and farm lending are simply scandalous.
“For example, interest on a standard Westpac credit card is 19.45%. In Australia, the comparable interest rate charged on a standard Westpac card is 17.74%. Australia has a higher official cash rate than we do. Kiwibank is able to charge 12.9% on its standard credit cards.
“The rate for borrowing cash on a credit card in New Zealand is 22.45%, while the same bank charges 19.99% in Australia.
“Why do Aussie banks charge us more than they charge Australians?
“Everywhere you look, the Australian banks are charging too much for lending in New Zealand.
“Total farm debt at the moment is around $43 billion. At farm lending rates of 13-14%, that means our farmers are having to pay $5.5-6 billion a year in interest alone to the Australian banks.
“The Australian banks charge interest on unsecured loans of 17.95%, compared to 16.9% charged by Kiwibank.
“New Zealanders sent $11.7 billion in profit and interest payments to Australian-owned banks last year. That’s more than the entire sum collected in GST revenue. There is no reason why interest rates can’t come down. The Australian banks are rapacious.
“This picture of excessive interest charges more than justifies a parliamentary select committee enquiry and one can only guess why the National government is opposed to one taking place,” Jim Anderton said.
Banks repatriating ‘enormous amounts’
01/07/09 12:10 Filed in: News Releases
Banks repatriating ‘enormous amounts’
New Zealand bank branches paid their overseas owners $11.7 billion in interest and profit last year.
Progressive Wigram MP Jim Anderton told a Federated Farmers conference today that the situation poses a risk for the agriculture sector, which is facing a ‘perfect storm’ of input price rises, threats to demand and now finance risks.
Total bank lending to agriculture in April this year was $43.7 billion, or 13.8 per cent of the total lent to New Zealand.
“Two thirds of that is lending to the dairy industry - at a time when one estimate says Fonterra could be forced to cut its payout from the current $4.55 if our dollar stays over sixty US cents. This would be very hard on some farming businesses that thought the last couple of years’ high prices would last longer. If interest rates came down just one per cent, farmers would save $450 million,” Jim Anderton said.
“The banking system has begun repatriating enormous amounts of New Zealand money.”
Remittances by banks in New Zealand to their overseas owners climbed from $3.8 billion in 2000, to 4.6 billion in 2004, and then began climbing steeply: $6 billion in 2005; $7.8 billion in 2006; $9.1 billion in 2007 and $11.7 billion last year.
“That’s more than the entire GST revenue of New Zealand. It is more than the entire education budget. And in a single year it is far more than the entire proceeds of the asset sales programme that caused so much pain through the eighties and nineties.”
“The huge remittances to banks are the result of the Australian banks funding our balance of payments deficit, now at sixteen billion dollars a year. They are taking an enormous clip of the ticket for doing it. We need to rely more on our own savings, instead of spending the savings of others.
“Interest rates are too high at a time when banks should be reducing them. In a recession, while banks around the world have been under pressure, the big banks here have been smirking. In the current environment, a lot of farms are facing a squeeze and they will struggle to meet the payments on their debt.”
New Zealand bank branches paid their overseas owners $11.7 billion in interest and profit last year.
Progressive Wigram MP Jim Anderton told a Federated Farmers conference today that the situation poses a risk for the agriculture sector, which is facing a ‘perfect storm’ of input price rises, threats to demand and now finance risks.
Total bank lending to agriculture in April this year was $43.7 billion, or 13.8 per cent of the total lent to New Zealand.
“Two thirds of that is lending to the dairy industry - at a time when one estimate says Fonterra could be forced to cut its payout from the current $4.55 if our dollar stays over sixty US cents. This would be very hard on some farming businesses that thought the last couple of years’ high prices would last longer. If interest rates came down just one per cent, farmers would save $450 million,” Jim Anderton said.
“The banking system has begun repatriating enormous amounts of New Zealand money.”
Remittances by banks in New Zealand to their overseas owners climbed from $3.8 billion in 2000, to 4.6 billion in 2004, and then began climbing steeply: $6 billion in 2005; $7.8 billion in 2006; $9.1 billion in 2007 and $11.7 billion last year.
“That’s more than the entire GST revenue of New Zealand. It is more than the entire education budget. And in a single year it is far more than the entire proceeds of the asset sales programme that caused so much pain through the eighties and nineties.”
“The huge remittances to banks are the result of the Australian banks funding our balance of payments deficit, now at sixteen billion dollars a year. They are taking an enormous clip of the ticket for doing it. We need to rely more on our own savings, instead of spending the savings of others.
“Interest rates are too high at a time when banks should be reducing them. In a recession, while banks around the world have been under pressure, the big banks here have been smirking. In the current environment, a lot of farms are facing a squeeze and they will struggle to meet the payments on their debt.”
Federated Farmers conference
01/07/09 12:05 Filed in: Speeches
Speech to Federated Farmers conference, 12 Noon Wednesday, 1 July 2009
I would like to thank you for the opportunity to talk to you as the Opposition spokesperson on agriculture. Can I also acknowledge the generous comments I have received from many farmers in recent months.
I have always been confident in the future of New Zealand’s agricultural industries. You have to be, because agriculture is intrinsic to our economy’s strength and our success. And it has been the backbone of our economy for most of our economic history because of our competitive advantage as a farming nation.
But while I am confident, I am realistic as well. There are a number of issues we need to deal with:
I’m glad you’re meeting here in Auckland, because it emphasises that the prosperity even of our largest city is dependent on the performance of our farmers. Agriculture is as relevant to Queen Street as it is to Hokitika, to Matamata, to Geraldine or to Carterton.
For that matter, the services that cities can provide can be crucial to our primary industries, too. In my home town, Christchurch, some of the most innovative scientists in New Zealand are rivaled only by their contemporaries in cities like Palmerston North and Hamilton in their research contribution to New Zealand.
There is always a risk that our economic backbone will be ignored in public debate about our economy.
At the start of this year, when the then new government opened its year in parliament with the Speech from the Throne, the word ‘agriculture’ didn’t even get a mention. It was the first time in at least a decade that our farmers were ignored. There is not much chance of developing the right policy for the agricultural sector, when farming isn’t even being contemplated by the government.
The policy environment in Wellington today, like every capital around the world right now, is occupied with the difficult global economic environment. Many developed countries are in recession. Some of them are in deep recession. We can take some comfort that demand for food holds up better in a recession than demand for the cars of General Motors or Chrysler.
But we can’t be too comfortable.
Reduced demand around the world is likely to result in reduced prices for our exports. Ultimately that means incomes will fall. And because the same reduced prices affect farmers everywhere, we can expect farmers in every country to redouble efforts to increase productivity and production, because this lowers costs per unit of output.
And since every farmer around the world is in the same situation, total production will increase, with prices falling and demand increasing only slowly.
On top of that, there is input price pressure. One of the critical elements in soil fertility is nitrogen. Industrial fertiliser is produced from gas or coal, and the price of fossil fuels are high. Persistent increases in the price of oil and gas would lead to higher fertilizer costs, so you get higher input costs and reduced demand.
Hand in hand with that picture, we can expect to see rising protectionism in many markets, particularly in agriculture. So that makes market access more difficult.
This is a tough recipe for farms.
There are only two ways to increase farm profitability: reducing the costs of inputs, or increasing the value of production from given inputs. A combination of both strategies is inevitable.
The underlying trend in the export prices for our commodity agricultural products is down, over the long term. With some medium term exceptions, such as China’s expansion and climate events, prices for agricultural exports have been under long-term downward pressure. The strong expansion of China in recent years has helped to push up the prices of many raw materials - including some that farmers compete for, such as energy - while also increasing the price for agricultural products.
But relying on that to continue forever is not a prudent long-term strategy for New Zealand.
At the same time that we are confronting the difficult environment for farm prices, agricultural finance is under stress as well.
This is what I call a perfect storm: input price rises, threats to demand and now finance risks.
I’ve been looking at New Zealand’s accounts with the rest of the world. When you look at our merchandise trade - our exports against our imports, the deficit is large but manageable. But we face a massive deficit in one crucial area - investment income.
We have been using the savings of people in other countries instead of our own earnings or our own savings to pay for our lifestyle. And the bill for that is starting to come in. The bill is coming in from banks.
How much do you think New Zealanders send overseas each year to the big Australian banks?
In the nineties we sent overseas about three billion dollars a year in profits and interest on loans extended to New Zealand banks. For the first half of this decade it was stable around about four billion dollars a year.
But something dramatic has happened. The banking system has begun repatriating enormous amounts of New Zealand money.
Last year, calendar 2008, the banks repatriated 11-point-7 billion dollars in profit and interest paid on loans. That is, the New Zealand branches paid their overseas owners $11.7 billion in interest and profit.
The total has risen from $3.8 billion in 2000 to $11.7 billion last year. That’s more than the entire GST revenue of New Zealand. It is more than the entire education budget. And in a single year it is far more than the entire proceeds of the asset sales programme that caused so much pain through the eighties and nineties.
Behind this enormous repatriation of New Zealanders’ money is a serious balance of payments deficit. It now stands at $16 billion - that’s about nine per cent of GDP.
In other words, our total overseas debt increased by sixteen billion dollars last year. Debt like this is easy to run up and hard to pay back. It poses a risk for the agriculture sector specifically. Total bank lending to agriculture in April this year was $43.7 billion, or 13.8 per cent of the total lent to New Zealand.
Two thirds of that is lending to the dairy industry - at a time when one estimate says Fonterra could be forced to cut its payout from the current $4.55 if our dollar stays over sixty US cents. This would be very hard on some farming businesses that thought the last couple of years’ high prices would last longer.
Relief from interest rates would help. As Federated Farmers’ Lachlan McKenzie pointed out yesterday, every one per cent drop in interest you pay on that debt is worth $450 million. That’s a lot of money that comes straight off farmers’ bottom line.
How refreshing it is to hear the farming sector focussing on this issue. In the nineties, some farming leaders used to applaud higher interest rates and the monetary policies that deliberately punished the productive sector.
Today, interest rates are too high at a time when banks should be reducing them.
In a recession, while banks around the world have been under pressure, the big banks here have been smirking.
In the current environment, a lot of farms are facing a squeeze and they will struggle to meet the payments on their debt.
This is serious, and it needs serious attention urgently. I’m not confident it will get it.
I’ll tell you what I would do if I were still the agriculture minister: I would immediately convene a taskforce of the best and brightest in the sector to develop a short-, medium-, and long-term strategy to the deal with the issue.
The huge remittances to banks are the result of the Australian banks funding our balance of payments deficit. They are taking an enormous clip of the ticket for doing it.
We need to rely more on our own savings, instead of spending the savings of others.
And we need some fresh thinking on the balance of payments problem too.
We need a broad-based focus to reduce our imports. We could make a start if we were able to reduce our dependence on imported oil.
If we could develop reasonably-priced biofuels and other forms of new energy, and reduce waste energy, we would score a huge opportunity for farming:
On top of all these advantages, it would help us to prosper in a world where consumers are becoming more demanding, and asking more searching questions about sustainability.
This is partly about how we manage our emissions - but it’s about a lot more than that as well.
If New Zealand is going to achieve a higher price for our production than our competitors, then quality and a perceived advantage as being more environmentally responsible will be part of our national brand.
As every responsible study shows, clean performance means we need to be responsible about our carbon emissions, too.
That’s why the Opposition is taking a constructive approach to working with the government on emissions trading. Only yesterday we voted with the government on a new climate change bill, in a spirit of working in the best interests of all our industry sectors.
Some conclusions are inescapable. As a general principle, polluters, one way or another, will have to bear the cost of their emissions. There are developments on the table, such as Gordon Brown’s proposal yesterday for a global development fund to help poor countries replace their emissions with cleaner alternatives.
The world is also moving closer to a global carbon trading scheme. Once that happens, New Zealand taxpayers will not long pay to subsidise polluters, as we are now. Any government of New Zealand is going to have to deal with emissions if we are a prudent country. What won’t work is hoping that the problem goes away.
And I continue to believe environmental sustainability is a competitive advantage for New Zealand. When you see the ugly factory farms in many parts of the world, and you compare their practices to the clean and open countryside we farm in New Zealand, you can see we have a huge opportunity.
I know there are few New Zealanders as passionate about the land as our farmers.
And so as the world cares more about the good of our planet, this should be an enormous opportunity for us.
It will require care to seize the opportunity, though, because it is implicit in seizing the opportunity that we will live up to our promise.
We can’t just say we are cleaner and higher quality than our competitors. We have to BE it.
Consumers will not be impressed if we are seen to be dragged into better environmental performance kicking and screaming.
If you want to know what happens when change takes too long, ask the pork industry how its animal welfare standards are perceived by the public.
Now I support giving that sector time to change. I also hope that a review of the animal welfare code for pigs this year will impose higher standards. But none of us should be uncertain about the costs to the entire industry of the strategy it followed.
The public saw it as too slow to change, instead of adopting a strategy of having the highest quality. The reputational damage has made the pork industry the subject of more letters to my office than anything else right now, including the smacking referendum.
If it can happen in that sector, it can happen in any other. We cannot be seen to be the source of dirty water or unsustainable users of resources. We cannot be seen as polluters when our industry is based on healthy growth, on food and on good health.
So overall, we have an environmental challenge. We have a challenge to the industry’s financial stability. We have a squeeze on its cost structure. We have a struggle in global markets.
The solutions will be discovered by science. Sustained, deep and ongoing investment in research and development in the industry is crucial - to identify cost-saving opportunities, and to identify new processes and new products that will extract more value.
As has been well rehearsed now - I put my stake in the ground for research and development in the primary industries sector. The NZ Fast Forward Fund was a commitment of seven hundred million dollars, which would earn interest and private sector partnerships and grow to be worth two billion dollars over its lifetime.
It’s been replaced by a relatively puny seventy million dollar annual commitment - for just four years.
There is no guaranteed long term commitment. There is no chance to earn interest and fund very large projects from an annual appropriation when science has to compete with every other demand on taxpayers’ purses.
It would be unfortunate if the message that politicians drew from this episode is that there is no political problem with cutting r&d. I believe there is a huge divide over this issue between the different sides of politics. Our side says the way out of our problems is investment in r&d and people. Our side says the way out of our problems is investment in knowledge, training and skills.
This is an important debate, and it is crucial for farmers. But whatever choice government makes, it is now up to our agricultural industry to lead investment.
Investment in science and in research and development is the most significant commitment we can make across all of our agriculture, to determine our own future.
Investment in marketing, and in market-responsive structures. Investment in talent, in creativity and in the strong communities that attract people to rural lifestyles.
Our r&d, our talent, and the structures underpinning them give our agriculture a competitive advantage over competing countries with temperate climates. Our competitive advantage is our science and research. It is our people and our lifestyle.
Our competitive advantage in the future will be in our superior products. In costs driven down by innovation, not exploitation. In processes focused on delivering a better product to consumers. In environmental sustainability driven by science, not wishes.
And the agriculture sector is going to have to lead investment to keep us at the forefront in all these areas, because innovation is not going to come from anywhere else.
It won’t happen on its own.
And it isn’t happening fast enough in other parts of the economy. When you look through our economy to where the wealth has been created, there are some pretty compelling facts to confront. One is that our corporate sector has spent most of the last twenty years - overall - destroying shareholder wealth.
When you compare stock market results to the performance of farms and agri-business, you get a clear picture of where the strength of our economy resides. I understand the stock exchange chief executive was invited along to Treasury recently to lecture State Owned Enterprises about behaving more like the corporate sector.
If they were to behave like our corporate sector, they would destroy value.
They would grow productivity more slowly than comparable overseas businesses.
They would focus not on doing a better job, but on sending more of New Zealanders’ cash to overseas owners.
The stock markets agenda is to lobby for more privatisation of our SOEs, rather than focusing on growing more successful New Zealand corporates that deliver returns to shareholders by doing well in global markets.
I would have more New Zealand corporates behave more like our most successful agri-businesses. Then they would grow productivity faster than the average of the New Zealand economy. They would focus on expanding their international connections. They would grow the scale and and expertise they need to be world class businesses. They would build on genuine, science-led innovation and send the returns back to creative and entrepreneurial businesspeople in the many communities around New Zealand that are at the heart of our agriculture.
As I started out saying - there is a lot to be confident about in our agriculture. But I am a realist too.
Realistic that we need to deal with the massive debt problem, and the too-high interest rates we are paying to Australian banks. $11.7 billion a year in profits and interest payments? That’s where earnings from agriculture are going.
Realistic that we need to invest in r&d and creativity to come out of tough global conditions stronger.
Realistic that we need to turn environmental challenges into an opportunity.
And realistic that we can do all of this.
But it will take a fierce commitment of energy and co-operation across the sector.
I saw a comment from Don Nicholson that New Zealand's best exporters are found out there, in the fields and paddocks of New Zealand under rain, sun or snow working every single day, to bring wealth to New Zealand. I agree with that, and it’s up to the rest of us to match that commitment and to add our work to their success.
I would like to thank you for the opportunity to talk to you as the Opposition spokesperson on agriculture. Can I also acknowledge the generous comments I have received from many farmers in recent months.
I have always been confident in the future of New Zealand’s agricultural industries. You have to be, because agriculture is intrinsic to our economy’s strength and our success. And it has been the backbone of our economy for most of our economic history because of our competitive advantage as a farming nation.
But while I am confident, I am realistic as well. There are a number of issues we need to deal with:
- Farm profitability is uncertain in stormy international economic conditions.
- There are broad risks in the financial strength of the agricultural sector.
- Global awareness about environmental impacts and animal welfare are forcing change in our markets, and changing the business environment - as well as affecting the raw materials farming depends on, like climate and water.
I’m glad you’re meeting here in Auckland, because it emphasises that the prosperity even of our largest city is dependent on the performance of our farmers. Agriculture is as relevant to Queen Street as it is to Hokitika, to Matamata, to Geraldine or to Carterton.
For that matter, the services that cities can provide can be crucial to our primary industries, too. In my home town, Christchurch, some of the most innovative scientists in New Zealand are rivaled only by their contemporaries in cities like Palmerston North and Hamilton in their research contribution to New Zealand.
There is always a risk that our economic backbone will be ignored in public debate about our economy.
At the start of this year, when the then new government opened its year in parliament with the Speech from the Throne, the word ‘agriculture’ didn’t even get a mention. It was the first time in at least a decade that our farmers were ignored. There is not much chance of developing the right policy for the agricultural sector, when farming isn’t even being contemplated by the government.
The policy environment in Wellington today, like every capital around the world right now, is occupied with the difficult global economic environment. Many developed countries are in recession. Some of them are in deep recession. We can take some comfort that demand for food holds up better in a recession than demand for the cars of General Motors or Chrysler.
But we can’t be too comfortable.
Reduced demand around the world is likely to result in reduced prices for our exports. Ultimately that means incomes will fall. And because the same reduced prices affect farmers everywhere, we can expect farmers in every country to redouble efforts to increase productivity and production, because this lowers costs per unit of output.
And since every farmer around the world is in the same situation, total production will increase, with prices falling and demand increasing only slowly.
On top of that, there is input price pressure. One of the critical elements in soil fertility is nitrogen. Industrial fertiliser is produced from gas or coal, and the price of fossil fuels are high. Persistent increases in the price of oil and gas would lead to higher fertilizer costs, so you get higher input costs and reduced demand.
Hand in hand with that picture, we can expect to see rising protectionism in many markets, particularly in agriculture. So that makes market access more difficult.
This is a tough recipe for farms.
There are only two ways to increase farm profitability: reducing the costs of inputs, or increasing the value of production from given inputs. A combination of both strategies is inevitable.
The underlying trend in the export prices for our commodity agricultural products is down, over the long term. With some medium term exceptions, such as China’s expansion and climate events, prices for agricultural exports have been under long-term downward pressure. The strong expansion of China in recent years has helped to push up the prices of many raw materials - including some that farmers compete for, such as energy - while also increasing the price for agricultural products.
But relying on that to continue forever is not a prudent long-term strategy for New Zealand.
At the same time that we are confronting the difficult environment for farm prices, agricultural finance is under stress as well.
This is what I call a perfect storm: input price rises, threats to demand and now finance risks.
I’ve been looking at New Zealand’s accounts with the rest of the world. When you look at our merchandise trade - our exports against our imports, the deficit is large but manageable. But we face a massive deficit in one crucial area - investment income.
We have been using the savings of people in other countries instead of our own earnings or our own savings to pay for our lifestyle. And the bill for that is starting to come in. The bill is coming in from banks.
How much do you think New Zealanders send overseas each year to the big Australian banks?
In the nineties we sent overseas about three billion dollars a year in profits and interest on loans extended to New Zealand banks. For the first half of this decade it was stable around about four billion dollars a year.
But something dramatic has happened. The banking system has begun repatriating enormous amounts of New Zealand money.
Last year, calendar 2008, the banks repatriated 11-point-7 billion dollars in profit and interest paid on loans. That is, the New Zealand branches paid their overseas owners $11.7 billion in interest and profit.
The total has risen from $3.8 billion in 2000 to $11.7 billion last year. That’s more than the entire GST revenue of New Zealand. It is more than the entire education budget. And in a single year it is far more than the entire proceeds of the asset sales programme that caused so much pain through the eighties and nineties.
Behind this enormous repatriation of New Zealanders’ money is a serious balance of payments deficit. It now stands at $16 billion - that’s about nine per cent of GDP.
In other words, our total overseas debt increased by sixteen billion dollars last year. Debt like this is easy to run up and hard to pay back. It poses a risk for the agriculture sector specifically. Total bank lending to agriculture in April this year was $43.7 billion, or 13.8 per cent of the total lent to New Zealand.
Two thirds of that is lending to the dairy industry - at a time when one estimate says Fonterra could be forced to cut its payout from the current $4.55 if our dollar stays over sixty US cents. This would be very hard on some farming businesses that thought the last couple of years’ high prices would last longer.
Relief from interest rates would help. As Federated Farmers’ Lachlan McKenzie pointed out yesterday, every one per cent drop in interest you pay on that debt is worth $450 million. That’s a lot of money that comes straight off farmers’ bottom line.
How refreshing it is to hear the farming sector focussing on this issue. In the nineties, some farming leaders used to applaud higher interest rates and the monetary policies that deliberately punished the productive sector.
Today, interest rates are too high at a time when banks should be reducing them.
In a recession, while banks around the world have been under pressure, the big banks here have been smirking.
In the current environment, a lot of farms are facing a squeeze and they will struggle to meet the payments on their debt.
This is serious, and it needs serious attention urgently. I’m not confident it will get it.
I’ll tell you what I would do if I were still the agriculture minister: I would immediately convene a taskforce of the best and brightest in the sector to develop a short-, medium-, and long-term strategy to the deal with the issue.
The huge remittances to banks are the result of the Australian banks funding our balance of payments deficit. They are taking an enormous clip of the ticket for doing it.
We need to rely more on our own savings, instead of spending the savings of others.
And we need some fresh thinking on the balance of payments problem too.
We need a broad-based focus to reduce our imports. We could make a start if we were able to reduce our dependence on imported oil.
If we could develop reasonably-priced biofuels and other forms of new energy, and reduce waste energy, we would score a huge opportunity for farming:
- Potentially a new source of revenue for farmers.
- Potential cost-savings.
- A contribution to a better climate and the natural resources our farms depend on.
- And a substantial reduction in our trading deficit with the rest of the world.
On top of all these advantages, it would help us to prosper in a world where consumers are becoming more demanding, and asking more searching questions about sustainability.
This is partly about how we manage our emissions - but it’s about a lot more than that as well.
If New Zealand is going to achieve a higher price for our production than our competitors, then quality and a perceived advantage as being more environmentally responsible will be part of our national brand.
As every responsible study shows, clean performance means we need to be responsible about our carbon emissions, too.
That’s why the Opposition is taking a constructive approach to working with the government on emissions trading. Only yesterday we voted with the government on a new climate change bill, in a spirit of working in the best interests of all our industry sectors.
Some conclusions are inescapable. As a general principle, polluters, one way or another, will have to bear the cost of their emissions. There are developments on the table, such as Gordon Brown’s proposal yesterday for a global development fund to help poor countries replace their emissions with cleaner alternatives.
The world is also moving closer to a global carbon trading scheme. Once that happens, New Zealand taxpayers will not long pay to subsidise polluters, as we are now. Any government of New Zealand is going to have to deal with emissions if we are a prudent country. What won’t work is hoping that the problem goes away.
And I continue to believe environmental sustainability is a competitive advantage for New Zealand. When you see the ugly factory farms in many parts of the world, and you compare their practices to the clean and open countryside we farm in New Zealand, you can see we have a huge opportunity.
I know there are few New Zealanders as passionate about the land as our farmers.
And so as the world cares more about the good of our planet, this should be an enormous opportunity for us.
It will require care to seize the opportunity, though, because it is implicit in seizing the opportunity that we will live up to our promise.
We can’t just say we are cleaner and higher quality than our competitors. We have to BE it.
Consumers will not be impressed if we are seen to be dragged into better environmental performance kicking and screaming.
If you want to know what happens when change takes too long, ask the pork industry how its animal welfare standards are perceived by the public.
Now I support giving that sector time to change. I also hope that a review of the animal welfare code for pigs this year will impose higher standards. But none of us should be uncertain about the costs to the entire industry of the strategy it followed.
The public saw it as too slow to change, instead of adopting a strategy of having the highest quality. The reputational damage has made the pork industry the subject of more letters to my office than anything else right now, including the smacking referendum.
If it can happen in that sector, it can happen in any other. We cannot be seen to be the source of dirty water or unsustainable users of resources. We cannot be seen as polluters when our industry is based on healthy growth, on food and on good health.
So overall, we have an environmental challenge. We have a challenge to the industry’s financial stability. We have a squeeze on its cost structure. We have a struggle in global markets.
The solutions will be discovered by science. Sustained, deep and ongoing investment in research and development in the industry is crucial - to identify cost-saving opportunities, and to identify new processes and new products that will extract more value.
As has been well rehearsed now - I put my stake in the ground for research and development in the primary industries sector. The NZ Fast Forward Fund was a commitment of seven hundred million dollars, which would earn interest and private sector partnerships and grow to be worth two billion dollars over its lifetime.
It’s been replaced by a relatively puny seventy million dollar annual commitment - for just four years.
There is no guaranteed long term commitment. There is no chance to earn interest and fund very large projects from an annual appropriation when science has to compete with every other demand on taxpayers’ purses.
It would be unfortunate if the message that politicians drew from this episode is that there is no political problem with cutting r&d. I believe there is a huge divide over this issue between the different sides of politics. Our side says the way out of our problems is investment in r&d and people. Our side says the way out of our problems is investment in knowledge, training and skills.
This is an important debate, and it is crucial for farmers. But whatever choice government makes, it is now up to our agricultural industry to lead investment.
Investment in science and in research and development is the most significant commitment we can make across all of our agriculture, to determine our own future.
Investment in marketing, and in market-responsive structures. Investment in talent, in creativity and in the strong communities that attract people to rural lifestyles.
Our r&d, our talent, and the structures underpinning them give our agriculture a competitive advantage over competing countries with temperate climates. Our competitive advantage is our science and research. It is our people and our lifestyle.
Our competitive advantage in the future will be in our superior products. In costs driven down by innovation, not exploitation. In processes focused on delivering a better product to consumers. In environmental sustainability driven by science, not wishes.
And the agriculture sector is going to have to lead investment to keep us at the forefront in all these areas, because innovation is not going to come from anywhere else.
It won’t happen on its own.
And it isn’t happening fast enough in other parts of the economy. When you look through our economy to where the wealth has been created, there are some pretty compelling facts to confront. One is that our corporate sector has spent most of the last twenty years - overall - destroying shareholder wealth.
When you compare stock market results to the performance of farms and agri-business, you get a clear picture of where the strength of our economy resides. I understand the stock exchange chief executive was invited along to Treasury recently to lecture State Owned Enterprises about behaving more like the corporate sector.
If they were to behave like our corporate sector, they would destroy value.
They would grow productivity more slowly than comparable overseas businesses.
They would focus not on doing a better job, but on sending more of New Zealanders’ cash to overseas owners.
The stock markets agenda is to lobby for more privatisation of our SOEs, rather than focusing on growing more successful New Zealand corporates that deliver returns to shareholders by doing well in global markets.
I would have more New Zealand corporates behave more like our most successful agri-businesses. Then they would grow productivity faster than the average of the New Zealand economy. They would focus on expanding their international connections. They would grow the scale and and expertise they need to be world class businesses. They would build on genuine, science-led innovation and send the returns back to creative and entrepreneurial businesspeople in the many communities around New Zealand that are at the heart of our agriculture.
As I started out saying - there is a lot to be confident about in our agriculture. But I am a realist too.
Realistic that we need to deal with the massive debt problem, and the too-high interest rates we are paying to Australian banks. $11.7 billion a year in profits and interest payments? That’s where earnings from agriculture are going.
Realistic that we need to invest in r&d and creativity to come out of tough global conditions stronger.
Realistic that we need to turn environmental challenges into an opportunity.
And realistic that we can do all of this.
But it will take a fierce commitment of energy and co-operation across the sector.
I saw a comment from Don Nicholson that New Zealand's best exporters are found out there, in the fields and paddocks of New Zealand under rain, sun or snow working every single day, to bring wealth to New Zealand. I agree with that, and it’s up to the rest of us to match that commitment and to add our work to their success.