Comment on agriculture - February 2009
12/02/09 14:05 Filed in: Columns
One of the first effects has been to reduce the value of our dollar. Eventually that will increase New Zealand dollar incomes, but in the short term it pushes up the cost of fuel. Imports of capital equipment cost more. The lower dollar provides some relief – especially in some of our most squeezed industries – but over the long haul a lower currency is no basis to build genuine long term prosperity.
At the same time that the dollar has been falling, commodity prices have also fallen. Consumers everywhere are closing their wallets. Businesses are reducing inventory and holding back from introducing new product lines. So the prices we can achieve for some of our staple exports are falling. I’m confident about our primary exports in the long haul, but in the near future, times will still be tough.
Panicked politicians and activists in some areas are becoming more protectionist. Even the celebrity cook, Jamie Oliver, is calling on British consumers to boycott meat that isn’t “local”.
For producers like farmers and other agri-businesses, credit is tightening. Though interest rates are coming down, banks and other lenders are much more conservative. (Some of them needed to be.) I’ve read of businesses finding it hard to get letters of credit. Who is interested in letters of credit from banks that might be gone by the time products are landed on foreign wharves? So producers are faced with the grim risk of putting their goods on ships with no guarantee they will be paid.
We can’t change the world economy but we can support our own businesses to position themselves during this downturn and to emerge even stronger when world economic growth turns up again. For example, more government investment in research and development at this time would ensure we don’t lose ground when farmers themselves are under pressure over costs. The two billion dollar New Zealand Fast Forward fund to invest in the future of our primary industries would have helped strengthen the economy. But the National government has made a priority out of scrapping it.
When the National Government unveiled a business tax package recently, I looked closely to see what would be there for our farmers and to invest in the future. Unfortunately, against a backdrop of global cataclysm, there wasn’t much. For example, there was a small rule change to make Disputes Tribunal claims easier, but I wonder how many farms that is going to make a difference to.
The $120 million a year of new spending in the package gives back less than a third of the increased tax on innovation that the National Government introduced under urgency just before Christmas, when they cancelled the Labour-Progressive government’s tax rebate for spending on research and development.
Words like ‘farm’, agriculture’ or even ‘exports’ weren’t mentioned in the business tax package. Our primary industries make up two thirds of our export earnings, and they didn’t get anything in the business tax package. When John Key wrote the Speech from the Throne, agriculture didn’t get a mention then, either. I wonder if the money market dealers running the National Government even realise that farms are businesses.
If we are going to weather the global economic crisis we need to strengthen our agricultural sector.
Small policies that tinker round the edge won’t do it.
At the same time that the dollar has been falling, commodity prices have also fallen. Consumers everywhere are closing their wallets. Businesses are reducing inventory and holding back from introducing new product lines. So the prices we can achieve for some of our staple exports are falling. I’m confident about our primary exports in the long haul, but in the near future, times will still be tough.
Panicked politicians and activists in some areas are becoming more protectionist. Even the celebrity cook, Jamie Oliver, is calling on British consumers to boycott meat that isn’t “local”.
For producers like farmers and other agri-businesses, credit is tightening. Though interest rates are coming down, banks and other lenders are much more conservative. (Some of them needed to be.) I’ve read of businesses finding it hard to get letters of credit. Who is interested in letters of credit from banks that might be gone by the time products are landed on foreign wharves? So producers are faced with the grim risk of putting their goods on ships with no guarantee they will be paid.
We can’t change the world economy but we can support our own businesses to position themselves during this downturn and to emerge even stronger when world economic growth turns up again. For example, more government investment in research and development at this time would ensure we don’t lose ground when farmers themselves are under pressure over costs. The two billion dollar New Zealand Fast Forward fund to invest in the future of our primary industries would have helped strengthen the economy. But the National government has made a priority out of scrapping it.
When the National Government unveiled a business tax package recently, I looked closely to see what would be there for our farmers and to invest in the future. Unfortunately, against a backdrop of global cataclysm, there wasn’t much. For example, there was a small rule change to make Disputes Tribunal claims easier, but I wonder how many farms that is going to make a difference to.
The $120 million a year of new spending in the package gives back less than a third of the increased tax on innovation that the National Government introduced under urgency just before Christmas, when they cancelled the Labour-Progressive government’s tax rebate for spending on research and development.
Words like ‘farm’, agriculture’ or even ‘exports’ weren’t mentioned in the business tax package. Our primary industries make up two thirds of our export earnings, and they didn’t get anything in the business tax package. When John Key wrote the Speech from the Throne, agriculture didn’t get a mention then, either. I wonder if the money market dealers running the National Government even realise that farms are businesses.
If we are going to weather the global economic crisis we need to strengthen our agricultural sector.
Small policies that tinker round the edge won’t do it.