Almost everyone in New Zealand knows that per capita incomes have been drifting backwards for at least two years. Looking back further, Dean Brunskill here at interest.co.nz has authored a graph showing that per capita GDP in September 2024, which is the latest available data, was essentially the same as five years previously in pre-COVID September 2019.
Although the presence of tough times has been and is obvious, the fundamental reasons why this has been happening are a subject of debate.
Separating fundamental long-term trends from short-term economic cycles is easy with hindsight but can be complex in real time. Similarly, separating fundamental causes from symptoms and noise can get very muddled. There is also a subjective overlay of politics in terms of who should bear the blame.
The key take-home proposition in this article, which I will now develop, is that New Zealand has a fundamental problem in that the value of exports from goods and services is too low relative to the total cost of the goods and services coming into the country.
This trade deficit combines with a very big outflow of interest payments to foreign investors, plus foreign-investor profits. Accordingly, my proposition is that New Zealand will not see sustained economic growth without a major lift in exports.
This problem of inadequate exports at the heart of poor economic performance has been an issue for a long time, but it has got a lot worse since 2021. This is in part because the interest on debt owned by overseas investors has increased greatly. These interest payments, plus profit on an increasing level of overseas-owned equity investments, have been soaking up increasingly large quantities of foreign exchange.
To place the exports issue in context, it is necessary to understand the basics of current-account economics for an open economy such as New Zealand. This current account measures the net effect of all income and expenditure cash flows between New Zealand as a nation and the rest of the world.
If there is a deficit in the current account, then there has to be a corresponding balancing inflow of new capital via the capital account, with that capital inflow subsequently generating its own outflow of earnings via interest and profit.
The graph that follows, sourced from StatsNZ, demonstrates what has been happening to New Zealand’s current account. Yes, it is a dismal story but it needs to be told.
Source: StatsNZ
This graph demonstrates how for much of the last 20 years we bobbled along with current account deficits in New Zealand dollars of between $4 billion and $12 billion per annum. These deficits were financed by corresponding inward flows of overseas capital.
This meant our national debt was increasing, but these were generally good times for export prices. Accordingly, and in broad terms, servicing the debt seemed manageable without any ballooning of the overall current-account deficit.
Then things went crazy in late 2021. By March 2023 the annual deficit had ballooned to $33 billion, 8.5 percent of GDP. Thereafter, the annual deficit bounced back somewhat by September 2024 to $27 billion, comprising 6.4 percent of GDP. There is general agreement among economists that this level is still unsustainable.
Remember, the only way to balance these deficits is by foreign investors continuing to further invest in New Zealand. As we should all know, this investment by foreigners in New Zealand does not provide free lunches.
The next graph illustrates something of the ‘how and why’ relating to the ballooning of current account deficits that started in 2021. Note that these data, which are also from the Stats Department, are quarterly data, not annual data. What we can see is that all three components of the current account got on a slippery slide, which helps to understand why the overall current-account deficit (the blue line) fell off a cliff.
Source : StatsNZ
Looking first at the ‘goods balance’, i.e. physical exports minus physical imports, this is represented by the yellow line. We can see that 2020 was an outstanding year with exports getting out to market but imports being low. There is no big mystery there, with COVID providing the answer. Thereafter, we have had three years on the slippery slide with imports greatly exceeding exports in each quarter in a way that never happened in the preceding 20 years.
Turning to the services balance (the red line), we can see that for many years we were almost always in surplus through to the start of COVID. This was largely driven by the tourist industry and overseas students, with both of these taps being shut off by COVID. It was only because New Zealanders were also prevented from international travel that the services balance did not crash totally. Clearly, there has been somewhat of a recovery in the last 18 months but New Zealand is still running overall deficits on services.
Then comes the primary and secondary income balance, depicted by the dark grey line. Some explanation of the terminology will be necessary for most readers.
Quite simply, the primary income is the net foreign exchange flow from interest and profits. Think of it as being the ongoing cost of past current-account deficits which were funded by an inward flow of capital. It can be thought of as being today’s ongoing cost of yesterday’s lunch that was funded with borrowed money, together with interest on more than one hundred years of historical lunches that were also purchased with borrowed money.
As of September 2024, the net overseas debt plus foreign-owned equity which we had to service via interest and profit repatriations was $209 billion. That is a lot of lunches, requiring a lot of exports to provide the funds.
The secondary income is the funds flow arising from overseas aid and remittances sent back home by migrants to their families. In New Zealand’s case, this secondary outflow is much less than the primary outflow.
It is evident that New Zealand’s balance on primary and secondary income has been negative each year but that it has got a lot worse in the last three years. This reflects both the overall increase in New Zealand based assets that are owned by foreigners relative to overseas assets owned by New Zealanders, and the impact of higher interest rates that are received by foreigners on the funds they lend.
The outward flows of primary and secondary income would be less of a problem if the incoming capital had been used for productive purposes. But alas, most of it was used to support consumption.
The economic bottom-line is that if we are to ever pay our own way, then we will either need to earn a lot more from overseas trade in goods and services or spend a lot less on imports. Most likely we will need to do both.
Alternatively, we can continue to borrow more money from overseas and also sell more assets, as long as foreigners still think these assets are a good buy. That is where the exchange rate comes into play.
The foreign exchange rate is the price mechanism that ensures foreign exchange inflows balance outflows in an open economy. The rate goes up and down according to overall supply and demand for foreign exchange.
If we are consistently living beyond our means, then eventually the New Zealand dollar declines in value relative to international currencies and vice versa.
The next graph sourced from the RBNZ shows the relationship between the New Zealand dollar and the American dollar over the last forty years, with the New Zealand dollar varying between 40 and 87 American cents.
Source: RBNZ
Looking back to the mid-1980s, when New Zealand opened up its economy to the rest of the World, this graph shows that there was lots of volatility for close on 20 years through until around 2004. Those were challenging years when New Zealand was battling through tough times. Then came the good times for New Zealand consumers through to 2015 when the New Zealand dollar was strong, with a brief exception caused by the 2008/9 GFC.
Those good times for consumers were largely a consequence of export volumes increasing, plus export prices rising faster than import prices. Primary industries, and dairy in particular, were the right place to be, but the benefits flowed through to everyone.
Then came the last ten years with the New Zealand dollar weakening relative to the American dollar. This correlates with increasing import levels, plus the compounding effects of increasing national debt, plus a lack of growth in export volumes.
This decline in the last ten years has not only been in relation to the American dollar. The next graph from the RBNZ shows how our dollar has also been declining against a trade-weighted basket of 17 currencies. The index value has dropped from 80 to 67 in that time, which is a decline of 16 percent.
Source: RBNZ
Accordingly, it does not matter how the story is told, there is a hard reality that the New Zealand economy has been on a slippery slope for the best part of ten years. The years ahead will now be challenging, as we have to pay for the lunches we have consumed historically and which we continue to consume.
One important point to emphasise is that all of the above numbers relate to New Zealand as a nation and not just to the Government’s debt.
The Government debt has also been growing, with $99 billion of Government debt as of November 2024 now being held by foreigners in the form of Government bonds (calculated from RBNZ data), and so this is part of the international liabilities of New Zealand as a nation.
However, what I have been talking about here is not just the Government, but the international debts of the overall nation. The two issues are linked, and Government deficits funded by foreigners are one part of the problem, but they are not the same.
Much of what I have written above comes across as a dismal story. I would therefore like to have finished on an optimistic note about the opportunities that lie ahead with our export industries. However, it is not that simple. Very few of our export industries are currently growing in volume.
The Government has a target of doubling export income in the next ten years with much of this coming from increased export prices. How this will happen is not obvious.
So, this article ends with three questions. How can New Zealand get out of the economic mire? Where will export-focused economic growth come from? What are the specific policies to make that happen? These are matters that we all need to be thinking about.
I have some ideas on what the answers could be but implementation won’t be easy. Those ideas are for some future articles.
*Keith Woodford was Professor of Farm Management and Agribusiness at Lincoln University for 15 years through to 2015. He is now Principal Consultant at AgriFood Systems Ltd. You can contact him directly here.
158 Comments
This is a clear wakeup call that the Government needs to attend to.
We need to incentivize banks to lend for productive investments and not for consumption, which is enabled by easy credit terms currently applied for the purchase of existing houses.
Use of the DTI macroprudential tool is currently limited to reducing risk, but it could be adjusted lower to prevent speculation on existing housing. A DTI of around 4.5 or less could be applied to purchase of existing housing stock, whether for private use or renting, which would reduce excess consumption that is not supported by local production.
And let's not forget there are two DTIs ... One for 'investors' and one for owner occupiers. Ditto LVRs which also have two.
And (this is ridiculous) the 'investor's' DTI (and LVR) is set to allow them to borrow more than OOs. This is ridiculous because 'investors' have been shown (proven in my opinion) to drive up house prices.
If the RBNZ were to set both LVRs and DTIs for 'investors' to be tighter than OOs (quite a lot tighter IMNSHO), then their influence on house prices (and the growing deficit) would be reduced substantially and they'd need to look for other places to invest - perhaps even in more productive areas of NZ Inc. (Note that government would probably need to force the RBNZ to do this as the RBNZ is unlikely to do this for pure macro-prudential reasons.)
And government should look very closely at LVRs for investors. Should government force 'investors' to front up with far larger deposits, the 'investment' would start paying income tax far earlier ... And our current account deficit would reduce, as less interest & profits get shoveled offshore to banks and other lenders.
Agreed. When investors can hold a property for half the holding costs of an OO, they should have half the DTI. That would spread investors out over more properties, but allow OO an easy outbid.
Furthermore, should the investor be a landlord, the lower debt cost would mean greater yield and perhaps more free cashflow for .. maintenence? (Yeah nah to maintenance).
This could be implemented fairly stably by just dropping the investor DTI 0.1pt/month until it hits the halfway mark.
Unfortunately, I think such a decision sits outside the RBNZ's mandate.
Chaosinflesh "I think such a decision sits outside the RBNZ's mandate."
It almost certainly does.
Remind me again, who elected them?
Edit: And while you're thinking about that concept of 'democracy', please take note that the RBNZ has been in charge of monetary policy for over 20 years. How's that working out for NZ Inc and the younger people we rely on to build our future?
The circumstances described here are not exactly novel. For twenty years or so from the mid sixties various governments attempted to ease the same problem by devaluation culminating in a whopping 20% by the incoming Lange Labour government in 1984. Not long after that the NZ$ was floated, it was expected to plunge, but it didn’t. Recall from my early career start in a trading bank in the early sixties exchange rates something about 2.1492 to £STG and 0.7732 to US$. Quite a while later attended a seminar and an address by economist Rufus Dawes with a chart showing detailing the falling NZ$ against a number of foreign currencies. This he explained depicted the efforts to keep the extent of NZ’s inflation out of the content of its export prices.
With the Left in NZ demanding a cutback in animal numbers on farms, and as beef cattle and sheep numbers diminish due to legislation rewarding pine plantations, the future does not look encouraging, especially if the Left gets back in at the next election. Labour and Green people I speak to do not see the connection between NZ exports and the conveniences (imported) that they like to have.
Agree, the sooner young people start learning the cult of exponential economic growth is strip mining the planets life support systems, the sooner we can get back to a reality based social system acknowledging physics and Earths annual biomass budget. Leaving room for non human life to also flourish.
Huge risk in expanding the largest export industries further. How much of NZ inc is dependent on bovines? Must be over a third.
All it would take is one cow focused disease to totally decimate this country. Don't think that a place like China wouldn't be happy to get us into huge strife and then come lend a helping hand...
In the long term, it isn't easy to see precisely what NZ can do to address this, given our geographical location (and risk factors), population size, educational levels, and the challenges that technology will bring to our major export products in the long term.
Given our population size, we will never become a manufacturing centre. So, where exactly can we generate the type of export income to ensure that we can continue providing a first-world economy that will be able to provide the income required for our education, social and health needs as we move into the future?
Maybe we can kick the can down the road some more. Still, for my family, I'm encouraging my three daughters to utilise NZ to achieve educationally and then jump across the Tasman, where at least they have the population size plus the ability to sustain themselves as a first-world economy given their export mix.
I sort of agree with you, however, im from Denmark , about 5.5 million people, no natural resources, except some oil and gas, ( like NZ)
The difference i see is ... Education, or nz's lack of willingness to invest in education for the masses...
Its like planting seeds.... you plant heaps, and if just one is successfull, it will carry the rest....and even if the remaing seeds sort of just yield average, you are still better off as a country...
You probably should send them to Australia for University. It wont be long before Australian employers cotton on to the fact that NZ Universities spend half their time teaching Treaty of Waitangi stuff at the expense of teaching real skills, and they'll stop accepting NZ qualifications. A NZ degree will be treated the same as an Indian degree - ie. a worthless piece of paper.
International students have already gotten the message and arent coming. Australia currently has 1 million international students enrolled. NZ - 73,535. Even the third world arent desperate enough to want to study here.
How is my post bigoted? Its a basic fact of life that if NZ Universities want to focus on teaching 18th century "indigenous knowledge" or "Maori Science" instead of teaching globally accepted and practiced skills, then those degrees will not be valued by overseas employers who want staff with those same globally accepted skills which they can utilise for the benefit of the employer. What relevance is the Treaty of Waitangi to an Australian or American employer? The NZ education system is relegating Kiwi kids to the bottom of the global class.
We operate in a global economy, our children should be properly prepared for that. If NZers want to study Maori stuff, they can do a degree in Maori Studies. Leave the maths, science, engineering, medicine, and everything else out of it.
Australian universities value Indigenous Studies KW so Australian employers may find NZ university graduates valuable as well:
Monash University - Indigenous Australian Voices is part of a suite of compulsory modules (including Academic Integrity and Respect at Monash) designed to ensure students fully understand Monash values.
Charles Sturt University - Our School teaches two core Indigenous Australian studies foundation subjects. These subjects are compulsory in over 55 courses across the three faculties of Charles Sturt University.
Australian universities value Indigenous Studies.... "The reason that these disciplines can drift so far from reality is that they are not answerable to reality. If an engineer miscalculates an equation, the building falls down. But what would accountability to reality even mean in the humanities, given that their findings are never applied?... The more a field becomes beholden to theory, or Theory, the further it floats away from empirical observation and therefore correction. The enterprise becomes entirely self-referential, words built on words, a kind of intellectual Ponzi scheme.
They might further consider that the majority of Black, Latino, and Asian Americans do not share their politics or ideology; that the people who speak for those communities in elite liberal spaces — not only colleges and universities but the media, the arts, the nonprofits — share the politics and points of view not of those communities but of other liberal elites and therefore do not, in the simplest and most important sense, represent them."
https://www.chronicle.com/article/academes-divorce-from-reality
Really? What's this then? https://courseoutline.auckland.ac.nz/dco/course/PUTAIAO/200/1245
And this - now COMPULSORY from this year https://www.auckland.ac.nz/en/study/study-options/undergraduate-study-o…
I could go on, but I'm bored and quite depressed by googling Auckland University courses already.
You are full of it. These things are minor, but important, components of the university system. You said universities spend half the time on the Treaty of Waitangi - bullshit.
But I am wasting my time even engaging with a facts-free bigot…concerningly, there seem to be more and more of your types
The points KW make are real.
Silk asks Parliament committee to drop mandatory tikanga Māori course for law students | NZ Lawyer
NZ is already an international joke. https://www.thetimes.com/article/maori-ways-of-knowing-is-not-science-s…
We do. And it has absolutely nothing to do with modern day Math, Science, Engineering, Business, or most other fields of study. It is simply a historical artifact that determined sovereignty of the country centuries ago.
New Zealanders deserve to get the same education as a student at Harvard or Oxford get. Time spent teaching Treaty of Waitingi stuff is time not spent teaching what other Universities consider to be the basics. New Zealand kids are the poorer for that, and the NZ economy will be even poorer for it in the long run.
Whatever. Feel free to ignore the informed view of someone who actually works in the university. I have worked there 6 years and have hardly had any exposure to Treaty of Waitangi things, and nothing forced down my throat. Most courses have less than 5% content on the Treaty or Maori considerations.
our universities being not as good as they could be has NOTHING to do with the Treaty and EVERYTHING to do with structural and funding issues.
Resource allocation within Universities follows the exact same inappropriate ideological pathways. Its paying for things people like you within the University thought bubble believe is important, and not what employers in the real world think is important. Perhaps you should venture into the private sector to discover the difference?
I lecture part time (15-20 hours per week), the rest of my work is in the private sector as a consultant. I often work 50/55 hours a week. There, I have probably shattered another one of your illusions.
70% of my 30 year working life has been in the private sector.
What’s your livelihood? How about I lecture you on something I am totally ill informed about 🤣🤣🤣
I have worked in three seperate industries, both in NZ and internationally. Not once have I ever had to think "what is the relevance of the Treaty of Waitangi to this problem".
Do you think Australian Universities are making Aboriginal studies a compulsory part of every degree path? Or American Universities like Harvard making students study Native American Indian cultural practices? I think if you even suggested to them that students be forced to pay to study such things in order to get a maths or science degree you would be looked at like the crazy you are.
"Western science as a way of knowing has precision and discipline, and unlike most other ways of knowing, it can be faithfully replicated (most of the time) and understood by practitioners around the world, regardless of their language. But I was led to believe that it could explain more than it really could. Its limitations could be found not only in the over-simplification of the world but also in the murky stupidity of politics, greed, and hubris." .....
"The phrases “traditional ecological knowledge,” “traditional local knowledge,” and “folk knowledge” are often associated with “fuzzy knowledge,” the kind that comes from funneling information through a human instrument, whereas “Western science” suggests an absolute objectivity, immune from human bias. In order to discern between the two, one must understand how different cultures, including the “knowledge seekers” of both, come to exist, survive, and thrive in their worlds. The bottom line is that both address knowing the world using different, yet ultimately similar, approaches. Western science excels at unraveling the unseen—our medical technology a testament to this precision—while traditional knowledge reveals the dynamics of larger systems, particularly animals, plants, and habitats, and the wisdom of our place among them."
https://www.culturalsurvival.org/publications/cultural-survival-quarter…
"I could go on, but I'm bored and quite depressed by googling Auckland University courses already."
You are indeed full of it.
Might I enquire how you are anyway qualified to simply 'google' Auckland University courses and then deliver such a verdict?
Face up to it, K.W. your bigotry knows no bounds. We should start referring to you as Archie Bunker. (And Archie had excuses that you do not!)
Feel free. You obviously have the same ridiculous belief system as the NZ Superfund, who thinks that speaking Te Reo should be a mandatory qualification for an investment analyst whose job it is is to analyse INTERNATIONAL companies.
The idiocy in this country and the reluctance to call it out because they are scared to be called a "bigot", is one reason why NZ is going to fall further and further behind the rest of the world. I have no such reluctance. Stupid is as stupid does.
The idiocy in this country is not unique. For example Montreal banned “Pizza” as a description in a name for a restaurant because it wasn’t French. Montreal has descended from a great vibrant, cultured city to a shadow of its former self. Every pragmatic and sensible person and concern left for Toronto post-haste.
My final word on this subject. There is a reason why Crimson Education is now a billion dollar company. One of NZ's biggest "success stories"! Shouldnt we be proud? What does it do you ask? It funnels NZ kids into overseas Universities because NZ Universities are such rubbish now, that parents are prepared to pay money to get their kids out of the NZ higher education system.
We are now losing our best and brightest talents before they even have a chance to contribute to the NZ economy. Smart people would sit up and ask why? Stupid people just bury their heads in the sand and deny that there is anything wrong, whilst continuing to double down on the very thing that is causing the problem.
I was going to post the same first sentence. I'm involved in a number of Uni's here, and with several employers. NZ degrees are, quite simply, rubbish compared to a G8 qual. I had to shoehorn my NZ qualification out of dregs of courses to make a whole - only to find specific degrees in the fields over here. (Which no longer applies to me except maybe for interest).
Some NZ unis cannot even offer a full Mathematics degree, ffs!
"In 2021 at the height of NZ's Covid Elimination Strategy, Gibson warned of its severe consequences on GDP. However, Covid Minister Hipkins marshalled all of his allies in the Main Stream Media to run the line that his virus strategy went hand-in-hand with great economic outcomes. The politically biased academics who he cynically used to back him up were mainly based at Otago University, where Hipkin's mate, Grant Robertson, now works as Vice-Chancellor, despite not having an academic pedigree - other than having drunk in Dunedin student pubs. Gibson argued the lives saved in 2020-21 due to lock-downs would ultimately be out-weighed by lives lost due to us becoming a poorer country. He was right. Hipkins & Otago's academics were wrong. Today's GDP figures are even more proof."
https://www.downtoearth.kiwi/post/latest-gdp-figures-nz-is-in-recession…
Robbo 2.0
https://www.downtoearth.kiwi/post/its-official-behind-all-the-hot-air-f…
Hi Keith,
Thanks for the article.
What do you think would happen to businesses and the economy if the govt prioritised GDP growth per capita and introduced a policy of maintaining the population at a stable level, instead of importing cheap labour and growing it?
My uneducated guess would be initially disruption, pain and tough love, followed by businesses being forced to innovate thus increased productivity that our nation requires.
Am by no means claiming to understanding the bigger picture on this though.
There is no reason the 'spiraling government costs' need to fall on working age kiwis if we embark on taxation reform.
Our refusal to think about a fairer taxation system that doesn't punish those that are working could be just as likely the reason for the exodus. Is the exodus even bad? It's possibly been a safety valve to our own unemployment levels.
Business investment would decline, as who wants to invest long term for a smaller pool of customers/workers.
Businesses that realise there are markets outside NZ? Businesses that can add value rather than rely on population/exponential growth? Selling things like houses to each other for ever increasing prices is not going to improve our situation. If it was, we'd not be needing a reminder from Keith in this article about the importance of exports.
Sam,
I agree that immigration policy and population policy very much need to be on the table for discussion. The reason for this is that our economy is very much natural resource-based and those resources are highly constrained. But first I want to look in more detail at how those natural resources underpin our export economy and the extent to which technology in each of them can make those industries go further. One of the challenges of having a population policy is that debate on the policy can become very polarised. So when I do go there, I want the debate to be evidence-based.
One of the challenges with per capita GDP is that when people depart New Zealand we have no idea as to whether they are leaving short-term or long-term. From memory, it is now more than five years since we stopped collecting those data by departure cards. We now have to rely on guesstimates based on the false notion that historical behaviours can be used to estimate current behaviours. It is only 16 months later when departees have failed to return that the Government can make good judgements as to how many of us were indeed long-term departees.
KeithW
Happy New Year.
It's only the 6th day of January and the author already has the most important article of the year prize in the bag. Our economy has an enormous albatross around it's neck - our primary account deficit. Perhaps events may yet save us, but it's unlikely. Our standard of living is going to continue to decline relative to peers.
I have been highlighting the insanity of making life tough for our exporters and favouring pine planting for our overall standard of living.
We are rapidly approaching the point of having to re-open our property market to foreign investors to fund our deteriorating external position.
Well said. Successive governments simply to do not take this matter seriously. Inflating the property market is the easy option to keep the property owning masses happy. No one wants to take the bitter medicine needed for long term prosperity and an improving standard of living.
Respected economist?
Now THERE'S an oxymoron.
Keith misses the other option - that we stop importing. He also misses the fact that farming is turning imported fossil energy (plus some local sunlight) into food calories, which are then exported using fossil-energy. Its turning a finite resource into bank-comuter-held digits - good luck cashing those in beyond the carbon-pulse.
Sheesh, the debate doesn't move very far, does it. Recoil to default-setting seems to be the norm.
NZ farming turns fossil into food. No hiding from it.
Undeniable. But there is no clear solution. According to the following theory, the optimal world population is 1.5 to 2 billion. This range has been suggested based on studies that consider the need for sufficient wealth, resource access, and preservation of biodiversity while maintaining a high quality of life for individuals. These estimates emphasize a balance between human needs and ecological sustainability
https://overpopulation-project.com/what-is-the-optimal-sustainable-popu…
One idea borrowed from science fiction narrative Logans Run is that we enforce a strict age limit on citizens. The world is controlled by a computer system that mandates individuals must die upon reaching the age of 21. This is enforced through a process known as "Sleep," where citizens voluntarily surrender their lives to maintain population control.
My fairly lighthearted response:
21 seems a bit young when people are holding off having children until they are in their early thirties.
Okay, I have no links to back up that age. It'd be more of a worry when considering the typical human brain hasn't matured until it is 25 (or is that just for males?). That computer system better be perfect otherwise: Idiocracy anyone?
No. The points, like your overall response, are largely b.s.
Take, for example, this gem ...
NZ farming turns fossil into food.
Um. No. Most of the food energy we produce is sourced from the sun.
And while a some of the energy content comes from fossil fuels - when consumed in overseas markets - it isn't that huge as a component. And it could be way, way less!
Thus, with regards, "So I counter - what is your vision when we have a lack of affordable fossil? "
May I counter ... Let's pretend I accept your DOOMSDAY outcome.
What is you plan? And sorry - more DOOMSDAY b.s. won't cut it.
Methinks you, like PDK, are some Evangelical Christians waiting for the Rapture. Prove me wrong.
what would the yields be without super-phosphate and nitrogen based ferts?
what would the profits be without large scale harvesting and processing?
whilst NZ can claim a lot of advantages with hydro power, moisture levels and photosynthesis, it is "imported" fossil energy that makes it productive.
I guess we could go all steam-punk, fire-up Huntly and build some lignite infrastucture in Southland.
Chris you need to think a bit wider than just growing a plant. Let's see how you get on farming it all your fertilising, building and running your tractor, transport infrastructure etc ...was just from solar.
Does not work old chap. The fossil delivers a millennium of compressed solar in one hit.
I don't need a plan to counter your shouting... point is that doomsday is all built in based on our chosen projectory.
Does work, old chap.
I come from old NZ farming families and they're 100% certain we can thrive without continuing to use fossil fuel based fertilizers to subsidize what would otherwise be uneconomic farms.
Perhaps that picture is lost on you?
I'll say it again ... Those continuing to use fossil fuel based fertilizers to subsidize what would otherwise be uneconomic farms.
If those "uneconomic farms" that are relying on fossil fuels stop producing food because fossil fuels are unavailable / too expensive, what happens to the amount of food NZ produces? What happens to the volume and value of our exports? What happens to the people who were employed on those farms?
You're also only talking about fertilisers, and not the entire supply chain that is wholly dependent on fossil fuels and fossil fuel-derived products.
unless you're talking abut a closed system, you'd better get down to the sewerage works and start stockpiling the solid waste and distilling the liquid waste for your future minerals.... or are you going to row out to the Chatham Rise to do some deep sea mining in your bathysphere
Chris, I could answer you in one word. Haber-bosch.
Yes, photosynthesis turns solar energy into chemical energy, you're right.
To do so, plants require nitrogen. Where does the nitrogen come from?
See this link:
How the world really works is that industry converts hydrocarbon into hydrogen into ammonia so that farmers can apply it to their fields and 50% of the population can eat.
"... and favouring pine planting for our overall standard of living."
So not a pine manufactured products industry then?
Oh right. We can't do that now, can we?
Why? Was it because the National Party and its backers sold off our electricity generators for private profit and now any chance that we might have had has gone overseas to countries where they burn fossils to generate electricity so they can manufacture their pine products from our raw logs?
If I may suggest - yet again - voters in NZ aren't very bright.
Its a choice of rock or hard place. When faced with the choice of higher taxes to pay for stuff, or selling off assets to pay for stuff, voters will choose selling assets every time. See Wellington Council. And Auckland Council to a lesser extent.
So say goodbye to Kiwibank and Air New Zealand.
Three points to add to a refreshing article.
1. It is important to look at the current account deficit relative to the size of the economy. When you do this you can see that (a) the deficit has been negative for at least 50 years and (b) it moves between about -4% of GDP when global interest rates are low, and -5% to -7% when global interest rates are high. As Keith points out, this is mainly due to increased interest payments and other primary income flows. However, falling real import prices and exported education and travel have helped.
2. While the current account deficit gives us the 'flow' it is important to look at the 'stock' - the international investment position. This has been *reducing* as a % of GDP since the GFC and has been broadly steady in real terms for the last 17 years (at least). How do you rationalise a persistent current account deficit with a stable overall international investment position? Basically, the offshore assets we own in NZ (international shares, equity, etc) have appreciated in value by more than the NZ assets owned offshore (NZ Govt bonds etc). And, our economy has grown a bit.
3. While I believe that the current account position is not as dire as people make out, that doesn't mean to say it is not important. The current account deficit has to be offset by either (a) increases in NZ private debt and/or (b) reductions in NZ private sector savings and/or (c) Govt deficit spending. Govt refuse to recognise this in their fiscal planning and that's a major reason why the depth of the current recession has shocked them. It's also why, if the current global environment persists, they have zero chance of running surpluses for years (and they should reflect that in budgets). The forward plan could be to continue to run Govt deficits, but, the obvious win-win here is to reduce our oil imports and to absolutely not get reliant on imported gas! We need to take strategic decisions on our economy that factor in the impact on the current account deficit and our primary income flows. See also reducing the $6bn of primary income flow offshore also known as aussie bank profits!
Without wishing to be the never ending doomster what worries me is the lack of resilience, fortitude even, of both the economy and society at large, in the face of the unexpected. Natural disasters EQs, cyclones, pandemics and GFCs for a start. The reliance on imported energy stands with that, the crises of the oil shocks of the 60’s cannot just be forgotten. Perhaps that is why the possibility of restoring oil & gas exploration is popular in the current government. Of course that doesn’t exactly confirm there is anything much to find, especially as such activity had already been declining.
Not just lack of resilience, but total lack of planning. Many of the so called crises were simply normal events which should not have been unexpected, and should have had a plan in place for. Like an earthquake, a flood, a cyclone. None of these are novel and never happened before.
One thing that I admire about Australia is that they take these things in their stride. There is no last minute panic about whether or not to call a national emergency during a Queensland flood - they just start dropping off sandbags for homeowners as soon as the rain is forecast. The Govt funded a house raising programme for homes in flood prone areas to prevent future issues. Victorian residents keep a bushfire go bag packed at all times, and have a fire evacuation plan in place (not to mention houses having to meet special bushfire standards in the home building code).
In NZ we treat a bushfire or flood as the equivalent of aliens landing, "oh my god, I cant believe that happened" #howcouldwehaveknown
An earthquake in Christchurch might have been unexpected as it was not on a known fault line. But an earthquake somewhere in NZ is clearly not unexpected, as its located on the Ring of Fire. An NZ earthquake plan should be prepared to go in to operation regardless of where the quake is located. As it was, Christchurch is still dealing with earthquake issues 14 years later. They were probably better prepared back in the 1930's for the Hawkes Bay quake.
After WW2 NZ set up the National Disaster Fund. Thereby extracting a levy from every insurance premium. These funds belonged to the people for the exact purpose of addressing such as EQs etc. But successive governments siphoned off those funds. Douglas in the 4th Labour government went to extraordinary lengths to place them in that government’s general ledger. Bit of an irony then that the foresight and wisdom of the excellent 1st Labour government should be defeated by the extremes of the 4th. Found a website once that detailed all that history of plundering, but unfortunately didn’t keep it on file.
Much less likely in Canterbury. With central New Zealand quake odds why would one wring hands over a runaway global warming hypothesis?
Central NZ
Within the next year - M7.0 or greater 6%
Canterbury
Within the next year - M7.0 or greater 0.4%
Indeed. I think the strategic response to global uncertainty should be sovereignty of money, energy, and food (defence is probably a bit out of our league). We have monetary policy sovereignty in place, but offshore bank equity holders milk our private sector debt. We really need to improve our energy sovereignty (our economy is a sitting duck waiting to be shot by global power plays). As for food, we could do a lot more - onshore processing etc.
You make a good point on the terms of trade, there is where Australia has been very fortunate.
CAD's are sustainable when there is a shortage of domestic savings, they are private and not government borrowings and where the returns are attractive - but still only to a point, the Pitchford Thesis is a useful reference.
CADs are sustainable when Govt and/or the private sector run continuous fiscal deficits. I find the Pitchford Thesis pretty flawed - it assumes that offshore appetite for NZ financial assets is driven primarily by investor choice rather than the current account deficit itself.
I disagree on your interpretation of the Pitchford thesis. The current account has to be funded one way or another, all Pitchford says is that for an economy with too few domestic savings to fund domestic investment opportunities, importing capital is sustainable in the long run. If there were no offshore appetite for A$ or NZ$ assets, there could be no CAD and we would have had a full blown currency crisis by now.
You can argue NZ has imported capital to fund our housing market rathere than mines, and that is unhealthy, but investors are getting their returns and Pitchford is correct.
We often talk past each other because we see things from different angles. My starting point is that NZ has strong institutions and a relatively stable economy. This gives NZ Govt Bonds, corporate NZ bonds, and the NZD decent credibility. We have strong credit ratings etc.
This means that we can buy things from the rest of the world using NZD (via FX etc). Why? Because offshore investors are happy to hold NZD because they know that there will be an appetite for investors to use those NZD to buy NZ financial assets if the return relative to other globally traded assets is good enough.
Hence, we can merrily import more than we export, knowing that the 'gap' will be closed by exporting our well-regarded financial assets. My point is that the credibility of NZ Govt and the NZD enables the current account deficit to exist - it doesn't drive how big it is, that depends on how much we can afford to import (and how much we have managed to export). And, what determines how much we can afford to import? The amount of NZD that Govt or Banks have pumped into the economy (net).
In other words, we create our own public and private credit domestically and then we export it to close our current account balance. We do not rely on offshore investors to provide us with credit. Economists get this the wrong way round imho.
This means that we can buy things from the rest of the world using NZD (via FX etc). Why? Because offshore investors are happy to hold NZD because they know that there will be an appetite for investors to use those NZD to buy NZ financial assets if the return relative to other globally traded assets is good enough.
The ratings agencies generally put us higher than Japan, which at one stage was judged by those agencies as less creditworthy as Botswana.
Aotearoa is a swap nation with the Fed (as is Japan I should note). That does suggest we're in a club.
That is a fair observation. The topic is also too complex to do justice in the comments section, but there is a lot of common ground.
One of the interesting developments in Australia is the amount of Super and investments flowing into the US has actually reduced their primary account balance substantially. To my mind, their 50y CAD had been a resounding success, they funded the mining boom with foreign capital which in return generated significant employment, tax and super. That and the post Covid terms of trade boom
Our external position is somewhat more fragile IMO.
"In other words, we create our own public and private credit domestically and then we export it to close our current account balance. We do not rely on offshore investors to provide us with credit. Economists get this the wrong way round imho."
Um. No economists don't get this wrong.
NZ Inc. has a 100% commitment to a completely floating FX rate. Ergo, if NZ Inc. gets into trouble, the NZD goes down, and NZ Inc re-balances.
I've said this before. You've acknowledged it.
Has something changed? Am I missing something?
Quick check we're talking about the same thing. Take the calendar year 2021 (a favourite of mine).
- Banks created a frankly ridiculous $37bn of bank credit (net)
- Govt added $16bn of deficit spending. That's a splendid $53bn of new credit. This made people richer and we imported more stuff and sent more dividends etc offshore, so...
- Our current account deficit was around $21bn.
My view is that the (1) and (2) - at least in part - enabled (3).
Now, of course, we would not be able to charge into the world buying $21bn of stuff if NZ Inc did not have credibility. But the credibility of our institutions gives us significant latitude. Do we disagree?
"This means that we can buy things from the rest of the world using NZD (via FX etc). Why? Because offshore investors are happy to hold NZD because they know that there will be an appetite for investors to use those NZD to buy NZ financial assets if the return relative to other globally traded assets is good enough."
That precludes currency risk...and in the current world return is not the driver...retention is. You appear to ignore currency risk...as said once before, currency value is arbitrary , especially in an uncertain environment.
It is not money if nobody else wants it, and NZD buys what?...some meat, milk powder, cheese, wine and logs....and a holiday at the ends of the earth? Hardly necessities in a troubled world.
I am not ignoring currency risk at all - I have been careful to say that we can run current account deficits because our currency / institutions have credibility. NZD is a second tier currency because you can use it to buy safe Govt bonds with yields that make it worthwhile to hold that asset relative to other similar instruments. The meat, milk powder etc is all pretty irrelevant.
So you see no possibility of a currency run in the near term?...remembering once it begins it is too late.
I agree that 'credibility of our institutions' maintains demand for our currency but that credibility cannot be said to be unrelated to our production, As you frequently note the decisions our governors make are counterproductive and our investments unproductive. Add to this the decline of social cohesion and lack of opportunity for future generations and there are good reasons to consider that credibility precarious....if those voting with their feet can see it, then we can be sure the financial world do also...and the ratings agencies have a poor track record.
Credibility is difficult to regain once lost
It's an interesting conundrum, but I'm of the mind that decades and decades of appeal for NZ as a place to live and a credible currency won't be foiled by a few years of mismanagement at present. There's always risk, and everyone should be aware and have some form of backup plan if the proverbial hits the fan. Perhaps I have more confirmation bias than some, but I often lean to psychology, and although when panic sets in it is swift and painful, behaviours and views take time to change and solidify.
In a stable growing world I agree that such weakness tends to be overlooked (that stability creates instability thing).....but in a world struggling for "growth" and consequent tensions rising having things vital to the (world) economy help maintain demand for a currency, even in the face of tight money...we are not so blessed.
Jfoe,
See also reducing the $6bn of primary income flow offshore also known as aussie bank profits! But just how can we do this? The impact of even a much bigger Kiwibank will be marginal, we can't nationalise the big 4 for obvious reasons and I don't think we could legislate to force them to pay smaller dividends, so how do we do it?
Could we put a cap-perhaps based on each bank's capital-on their lending to the domestic property market on a sinking lid basis? The gap could be filled by either the current players, or possibly a government sponsored building society. I can recall when all house mortgages in the UK were through building societies and they were boring, but very stable.
Jfoe
The graph to which you have added a link to is very insightful. I hope people click on it.
In interpreting that graph I note:
1) Apart from the GFC, which was induced by crazy distortions in the financial system which resolved relatively quickly, the current account deficit relative to GDP is the most negative it has been for almost forty years.
2) The current-account deficit we have right now is indeed driven by high interest rates, but these interest rates are no longer particularly high by historical standards.
3) Historically, much of the capital that was imported was used to invest in growth of export industries. That is no longer the case. Instead it helps finance the Government deficit by purchase of Government bonds and buys existing businesses.
KeithW
Humbled by the response Keith, thank you. Yes, I personally think we have seen a structural change in our current account deficit due to (a) Marsden Point closure, (b) increased import of services (media, advertising, digital business services, banking, insurance, license fees etc), (c) the possible end of the ever-cheaper goods from Asia era, and (d) increased offshore ownership of NZ equity. I do think we should so something about it!
I come at your point (3) from the other direction though - I think it is the structural change in our current account balance (plus tight monetary policy) that has forced the Govt into those bigger deficits. The Govt think they can determine how much deficit spending they will do - they are funding out that it is not as simple as that.
Those good times for consumers were largely a consequence of export volumes increasing, plus export prices rising faster than import prices. Primary industries, and dairy in particular, were the right place to be, but the benefits flowed through to everyone.
This statement would have been equally true in 1972
Accordingly, it does not matter how the story is told, there is a hard reality that the New Zealand economy has been on a slippery slope for the best part of ten years.
Likewise this statement would have equally applied in 1984.
In review the country 50 years later is still beholden to its Farmers to carry the load--as they very successfully did up to 1972. International Tourism (and international students) added a 2nd leg to the stool starting in the 90's, but the 3rd leg is yet to be found.
Until that time comes I think it would be wise to tap some of that $30 Billion in Cullen Funds and redirect the Nations savings into a form of "internal world bank" so that for one the Local and National government bodies can borrow domestically--that alone will go a long way to curing the distortion in the primary balance of payments outflow. And use the Cullen Fund to capitalize Kiwi Bank to the degree necessary to entice Kiwis away from the Aussie Banks (which were all Kiwi Banks Pre-Douglasnomics). That would go that much further in aiding the balance of payments.
The offshore debt is created when we buy more stuff from the rest of the world than we sell them. The imbalance literally leaves offshore investors owning NZ dollars - their asset, our liability (debt). Those dollars are then used to buy NZ financial assets - most notably NZ Govt Bonds, which pay interest, are very safe, and can be traded internationally. The only way we can reduce our offshore liability is by buying less from abroad (or sending less money abroad), or selling more offshore / earning more income.
I know, right? How come we arent celebrating the reduction of sheep farts and telling the world how much we have already reduced our climate emissions by? And there are still more sheep in NZ than there are cows, so why not focus on reducing more sheep and not the animal that is responsible for the lions share of our global export revenue?
The kickstart needed likely comes from a decrease in imports first....this may occur as the dollar weakens, but history shows that we appear unable to enact the structural change required when NZD dollar value declines...short-termism and an overly optimistic/complacent attitude appear to hinder our ability to trust in our own potential compounded by our distance from our markets ....and now again to be tested by our access to energy.
I am old enough to vaguely recall the political debate around this topic that has been absent from political discourse for the past couple of decades. There appears a lack of understanding at the political level, certainly publicly, so the wider public can not be expected to demand otherwise.....by design?
Kiwi 'investors' would rather own houses than paddocks. (Harsh, but true.)
The solution - in the first instance - is the overhaul of our tax system that rewards Rentier capitalism above actually doing something, or, God forbid, actually working.
Vicious circle isn't it. As people grow and learn, they realise that rentier capitalism (thanks to current tax system you mention) allows them to work less later in life and live a more comfy life doing less work overall across their life, thus harnessing more free time to pursue their own ventures as they see fit, as opposed to being a wage slave. In buying into said system they actively vote against anything that could threaten it, and the cycle continues. I agree with your sentiment, large scale changes needed that benefit the majority and the future generations over the current.
If anyone thinks livestock farming will solve this problem they are dreaming. Imports of nutrients etc is what keeps the grass growing. Not to mention imported fuel.
There is a reason grassland farms are disappearing, it's called very little profit at farm gate. Dairy farms are the exception and they already use most quality land suitable, can't see much expansion there.
There is also the issue of very marginal erosion prone land that produces very little without major inputs. Another way has to be found.
100% right Hans. It’s not just livestock but it’s any landuse on steep, remoter hill country that is not profitable anymore.
We have tried for 50 years plus to solve this by producing more from the land and apart from Dairy and some hort it hasn’t happened. One thing that is ticking away in the background is KiwiSaver. A lot of this is invested offshore and produces earnings back to NZ - in effect export earnings. Over time through ongoing contributions and compounding this will keep growing. Australia now has 4 trillion in super funds invested away and growing.
If you want to get a share of the Aussie bank profits buy shares in them - which most KiwiSaver funds will.
Until we have a fundamental shift towards promoting and celebrating education achievement we will struggle - although with KiwiSaver etc I’m personally optimistic about NZs long term future but it will be a long road to better times and the sources of export income will change over time
We just need a politican with the balls to tell us we can't continue to fly overseas at the drop of a hat, drive new resource guzzling vehicles everywhere, and import endless amounts of 5 second life span crap, to fill our landfills with. Of if we do, we pay the real price of doing so.
I think services balance are been effected by the huge amount of advertising and other data revenue going offshore to multi nationals paying virtually no tax, and that we are importing a huge amount of food we could produce ourselves. In what f'd up scenario should we be importing potatoes, yet we do. We are proud to feed the world ignoring the fact we can't fèd ourselves.
" In what f'd up scenario should we be importing potatoes, yet we do."
It is indeed curious that such should be so. How can any economy provide such a product the distances required and still make a local product such as potato products uncompetitive?...Subsidies in production and/or transport?....what of our trade agreements?
If Nz doesn’t stop creating revenue from ocr and cashing out surplus to meet the target to pay high paying govt jobs, in the next 10 years there will 4 or 5 inflations.
revenue generation is the issue of businesses running on rented property which are mortgaged, same is with the household, same is with those who rent homes. Businesses need to mark up high to make profit after paying all govt agencies and other bills
nz strategy to stop inflation is to increase ocr rate, yes it stops prices going up but won’t reduce what has gone up , but at the same time will kill 10000s of jobs, and that actually lead to reduced taxes, and kill households
the so cold economist don’t want to care why the prices are going up , it is simple because of the high income and upper middle income that automatically goes up when minimum wage gets increased, and thus lower income earners will also not gets the benefit of wage increase, as it will lead to another price increase
income on top order should not go up with minimum wage increase and that’s only how we can reduce the frequency of continuous inflation.
once they realise this it will already be very late …
secondly all businesses no mater the best wholesalers once come to New Zealand will trying creating huge profit from every sale and Costco is the best example.
3rd is residential build cost, too many agencies getting huge profit, including govt agencies and councils and they all pay hugely to employs and that too induce inflation
Lastly state owned companies airlines power are looting public through privatisations and are working to create profit for shareholders and gst of power bills and other govt services too adding to inflation.
huge taxing on essentials by the govt company is the state were we are in.
money has to come from exports but if everything produced here is sold based on export demand, it again lead to domestic inflation, look at those countries which export fuel, they make sure it is cheap for domestic buyers
so next inflation is on it way… wait for 2 to 3 years
Costco charges far more in NZ for items than it does in Australia. Because it can. It doesnt need to offer the cheapest price possible, it just needs to offers a price a tiny bit lower than its competitor. The other company that is famous in Australia for low priced goods is Chemist Warehouse, and again in NZ they charge way more than what they do in Australia. Its got to the point where I stock up on stuff from CW whenever I visit Australia - its like being back in the old days when everyone used to do weekenders in Sydney to go shopping.
As I keep saying here - sell citizenships at $5m a go........
To generate initial interest, we could auction the first 50 at $1 reserve on TradeMe.
The only provision is that any winner needs to state they are no worse than a 'loveable rogue'.
We seem to have quite a few like that according to the crime news so they would fit right in!
We already did that, and we still couldnt get any takers (ok, we got one, for those pedants that will take issue with my choice of language).
https://www.rnz.co.nz/news/national/477687/new-millionaire-migrants-vis…
Labour killed that idea when they started writing to wealthy people asking about the value of their assets and talking about a wealth tax.
As I keep saying here - sell citizenships at $5m a go........
They do this, but the purchaser has to add value to the economy in doing so, otherwise if we have golden citizenship (for sale) the wealthy would simply get it for convenience and to hoover up more assets here to effectively extract rent from NZ. Suddenly short term gain turns into long term pain.
What value of exports did we lose when we closed the refinery (plus we now import bitumen I believe)
What impact in $?
The refinery was responsible for supplying:[5]
- around 85% all of the country’s jet fuel
- around 67% of diesel
- around 58% of all petrol
- all fuel oil for ships
We now import 100% of the countries jet fuel, which we pay more for than crude, and 100% of the diesel, which we pay more for than crude, and 100% of the petrol, which we pay more for than crude, etc.
The refinery added value to a cheap input, preventing us from having to import the more expensive outputs.
That's my understanding, anyway.
The refinery was responsible for supplying:[5]
- around 85% all of the country’s jet fuel
- around 67% of diesel
- around 58% of all petrol
- all fuel oil for ships
Add in the derivative products from the refinery such as sulphur, ammonia, C02 etc which were used in our export industries also and the issue grows exponentially. Also reiterates how reliant we are on crude oil of course.
Always good to see your thinking in these pages Keith. I'd class myself as an economic simpleton but this is one area where simple reigns so like many commenters it's been at the forefront regards Aotearoa problems. The biggest road block is still people's inability to look past red and blue. This deficit is what we have been voting FOR the last forty years.
The whole country needs a change of attitude.
A total change in attitude, I agree. We all think we can squabble over housing using ever increasing debt. It's a competitive game of musical houses and is going to end in disaster and ruin. Some will bail out with capital gains but the nation as a whole won't and with the cost of doing anything we can't export our way out.
A better tourist experience could assist ...some locations could do with a rethink and rework . Tourists are looking for something exciting and memorable. Some of our accommodations are simply lacking. Maori could bring something to the table here but without high standards and a quality experience it will be a battle. Another issue at home is improving social outcomes for those less desirable sectors and unfortunately housing forms part of this . An effort needs to made to utilize the less productive elements within our society and empower them to lean towards inclusion and developing ideals that better make for growth. Adding folk to the unemployed line will not achieve anything marked . Plenty of locales in NZ that could benefit from investment but do not because of feral social issues. This is where law and order need to up the game and regulators need to improve the punish /reward outcome . A move to the 4 day working week could assist with keeping the unemployed lines thinner...there are things this or any government could do that make NZ a much more attractive option for tourists and there are certainly sleeper locations that could do with an awakening. Fixing the roads is something but fixing the journey is something else....
K.W appears to be responsible for almost half the comments on this thread. Contrasting his knowledge and ability to articulate ideas with Jfoe is quite something. Clearly one of the two has significant insight into economics and the topic, the other an incredible confidence in their slanted opinion. It paints a clear picture on how dialogue has gotten so limited and problematic in the social media age.
I have a deal of respect for Keith having read many of his articles and comments over the years, but I fear he is not digging deep enough here.
The real problem is the government deficits and how they are funded. Keith is talking in terms of the standard economic theory (which most governments persist in trying to operate to) which is already proven to be seriously flawed and not working. He talks about growth when we know that persistent economic growth is not sustainable in a finite system.
What needs to be challenged is where the government deficits are being created, how they are funded, and what the taxation structure is doing to support it. My belief is the government is not levying enough tax on major companies and others who are profiting hugely in NZ while paying a little tax, if any, that they have to and taking those profits off shore. NZ gains little benefit from their presence, but suffers when the money goes overseas. We should be looking at how that can be changed.
I used to have a flower export business for 10 years. I was regulated out of business. Before we can to exporting more we need to fix the internal cost structure by deregulation and having cheap houses. By making our internal environment better we can export and make money. We put all our efforts into competition for housing and increasing debt. A one way journey to economic ruin.
Almost no-one here is talking about adding value to the few things we can produce.
It seems that's far too unglamorous to attract attention in a political environment focussed on: short-termism, an addiction to idealogical bling, brand identity differentiation, and the drug that is power.
It also appears too technical to be grasped by a public service management who largely have never made anything in their lives.
To complete the triumvirate of misery, it's apparently too hard for the big commercial organisations to undertake as it's adequately profitable and just so much easier to export commodities.
Given things like modern wood products are produced by heavily automated processes, what's standing in the way of sending value-added products overseas rather than raw logs? Apart from: capital (hard, where property hoovers up every available cent), hard work (what's our work ethic like these days?), supporting infrastructure and regulation (enough said), leadership (ditto), and imagination (difficult, as why would the ambitious stay, given all the previous?)
The result is that don't have the infrastructure for a mature, diversified economy, let alone the economy itself, and we are still (to misquote David Lange) a nation that's an amusement park, farm and housing market.
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