Comment on agriculture - June
22/06/09 11:40 Filed in: Columns
Any nation which earns its living as an international commodities trader is going to be affected by what happens to purchasing power in our major markets.
It is true that that the New Zealand banking and finance sectors have not been in the business of offering ‘toxic loans’ like United States and European banks, but we have nevertheless experienced an overheated speculative housing boom.
That helps to put pressure on the productive sector. When speculators force up housing prices, interest rates go up, and then our dollar gets over-valued too. And no one is helped when a boom turns into a bust.
There are a couple of things we can do.
We can run the government’s finances in a way that smoothes the business cycle better. For example, the last government refused to over heat the economy by turning surpluses into deficits in the good times. This left us with one of the strongest sets of government accounts in the developed world. The other side of the coin is that we need to be ready to give the economy a push when international financial waves crash on our shores.
The worst thing we can do is make the crisis worse by tightening the government’s belt when private spending is already falling.
There is more we can do to help our selves. A backstop of local financial institutions, including Kiwibank, can pick up some slack.
And the other thing we have to do is invest in regional development and the strength of our most productive parts of the economy. In New Zealand, this means our primary sector.
When I was minister of economic development and then agriculture I saw regions that had been hammered by years of low or even negative growth. We got stuck in and within three years every region in New Zealand was in positive growth mode. As they grew, the jobs came back quickly, and communities grew far stronger.
It will be interesting to see if the current government can maintain that record. I do know however that they will not do it by building a bicycle lane or by cutting back on the working fortnight which are measures which cannot or will not increase either production or productivity.
I have been saying since National cancelled the two billion dollar NZ Fast Forward fund that I was looking forward to seeing how they replaced it. Unfortunately, they have replaced it with the largest cuts in science and research in New Zealand’s history.
While governments around the world are investing to make sure their economies come out of recession stronger, in this year’s Budget the National-led government cut as much out of science and research in the primary sector as it is investing in infrastructure.
The total value of primary sector science investment falls from $2 billion in the NZ Fast Forward Fund under the last government, to as little as $1.2 billion now. With matching private sector funding, the total investment in primary sector research and development is going to fall by $800 million, or about 0.4 per cent of GDP.
The government has not replaced a cent of the cancelled research and development tax credits and has cut innovation spending by more than the value of the personal tax cuts. This huge cut in science and research spells disaster for the future of New Zealand’s economy, especially in our highest export earner, the primary industries sector.
It is true that that the New Zealand banking and finance sectors have not been in the business of offering ‘toxic loans’ like United States and European banks, but we have nevertheless experienced an overheated speculative housing boom.
That helps to put pressure on the productive sector. When speculators force up housing prices, interest rates go up, and then our dollar gets over-valued too. And no one is helped when a boom turns into a bust.
There are a couple of things we can do.
We can run the government’s finances in a way that smoothes the business cycle better. For example, the last government refused to over heat the economy by turning surpluses into deficits in the good times. This left us with one of the strongest sets of government accounts in the developed world. The other side of the coin is that we need to be ready to give the economy a push when international financial waves crash on our shores.
The worst thing we can do is make the crisis worse by tightening the government’s belt when private spending is already falling.
There is more we can do to help our selves. A backstop of local financial institutions, including Kiwibank, can pick up some slack.
And the other thing we have to do is invest in regional development and the strength of our most productive parts of the economy. In New Zealand, this means our primary sector.
When I was minister of economic development and then agriculture I saw regions that had been hammered by years of low or even negative growth. We got stuck in and within three years every region in New Zealand was in positive growth mode. As they grew, the jobs came back quickly, and communities grew far stronger.
It will be interesting to see if the current government can maintain that record. I do know however that they will not do it by building a bicycle lane or by cutting back on the working fortnight which are measures which cannot or will not increase either production or productivity.
I have been saying since National cancelled the two billion dollar NZ Fast Forward fund that I was looking forward to seeing how they replaced it. Unfortunately, they have replaced it with the largest cuts in science and research in New Zealand’s history.
While governments around the world are investing to make sure their economies come out of recession stronger, in this year’s Budget the National-led government cut as much out of science and research in the primary sector as it is investing in infrastructure.
The total value of primary sector science investment falls from $2 billion in the NZ Fast Forward Fund under the last government, to as little as $1.2 billion now. With matching private sector funding, the total investment in primary sector research and development is going to fall by $800 million, or about 0.4 per cent of GDP.
The government has not replaced a cent of the cancelled research and development tax credits and has cut innovation spending by more than the value of the personal tax cuts. This huge cut in science and research spells disaster for the future of New Zealand’s economy, especially in our highest export earner, the primary industries sector.