In my most recent article I set out the reasons why sustained economic growth for New Zealand is not possible without sustained growth of exports. Our latest current-account deficit of $27 billion for the September 2024 year is a measure of the extent to which we are currently living beyond our means.
This $27 billion deficit has had to be met by a balancing net $27 billion of new capital coming into the country over the same 12 months. Quite simply, there is no way this situation can be remedied without either a very big increase in exports or a very big decrease in imports, or alternatively both of these happening.
Much of the current account deficit is due to historical flows of imported capital that now have to be serviced through interest payments and repatriation of profits.
I use this as an example of the principle that in economics there are ‘no free lunches’. There are a lot of lunches from the last few years that we still have to pay for.
The net interest payments and profit repatriations now total about $15 billion each year of foreign funds outflows and it is this that is driving the current account deficit. This number has been compounding fast in response to the overall net debt between New Zealand and the rest of the world that now exceeds $200 billion.
Note that this is the net debt after balancing out the overseas assets of New Zealanders. The gross debt is about $600 billion.
Well, that is enough about macro-economics reminders. It’s time to move on to the question of where increased exports might come from?
There is a hard reality that New Zealand’s comparative advantage lies in land-based products. We are never going to be internationally competitive in the manufacture of cars, computers, most medical equipment and medicines.
These manufactured goods need large home markets for efficient production and marketing. It also does not help that most of the world’s consumers are a long distance away. The reality is that manufacturing industries have been declining as a proportion of the economy for good reasons in a trade-based world.
New Zealand’s comparative advantage in land-based products plays out primarily in pastoral industries — dairy, beef and sheep, with deer a supporting act. Add in horticulture, wine, forestry and fish, both ocean and aquaculture, and the latest SOPI document from MPI says that food and fibre products comprise 81 percent of our merchandise exports.
StatsNZ data for the year ending November 2024 shows total merchandise exports of $70 billion and merchandise imports of $78 billion, giving a merchandise deficit of $8 billion. However, simply balancing out merchandise exports and imports by finding another $8 billion of exports would be no more than a start.
If we are to prevent further compounding of the more than $200 billion net liabilities to overseas investors, then we need to bring the overall current account, currently running at $27 billion annual deficit, back into surplus. What a task!
The first step on a long journey is to focus initially on by far our biggest export industry which is dairy. Can dairy be part of the journey?
According to MPI in their latest SOPI report of December 2024, dairy products are expected to earn $25.5 billion of export income in each of the June 2025 and 2026 years. This compares to 25.3 billion in the June 2024 year and $26 billion in the June 2023 year. Dairy comprises approximately 35 percent of our merchandise exports.
My own view perspective is that the SOPI dairy export estimates for 2025 and 2026 are starting to look conservative, despite only being published in the last few weeks. This is because the New Zealand dollar has dropped remarkably in recent weeks.
Only time will tell whether this is part of a longer trend or simply the financial reef fish darting hither and thither. Of course, if the current loss of value of the New Zealand dollar is maintained, then both export returns and import costs will rise when measured in New Zealand dollars.
Most dairy farmers will make good profits this year. In Canterbury where I live this has also flowed through in recent weeks into several dairy farm sales at record prices. These have yet to flow through to official statistics but they are confirmed sales.
There are multiple cautionary notes as to whether the dairy industry can expand further. The hard facts are that there has been no upward trend in total annual production of Milksolids (measured as fat plus protein) since 2014/15. In that period, cow numbers have dropped by 6 percent but per head production has increased by about 6 percent, creating an industry that is overall static.
For those readers unfamiliar with the term ‘Milksolids’, typically spelled with a capital or abbreviated to ‘MS, it is one of the oddities of the dairy industry. It is not the total solids in milk, only the two most valuable components that are used as the basis on which farmers are paid. As for the strengths and weaknesses of the terminology, I don’t make the rules, I and farmers just play the game.
The key reason we use ‘Milksolids’ rather than total solids is that the total value of the milk aligns more closely to the fat plus protein quantity than it does to either the volume of milk or the total solids in the milk.
New Zealand milk is particularly high in both fat and protein. This is because we have bred specifically for high fat and protein content, whereas Europe and the USA have bred specifically for milk volume, and that is the basis on which their farmers are typically paid.
Most investments by New Zealand dairy farmers in the last ten years have been strongly focused on increasing cost efficiency rather than to increase overall levels of production. This 10-year period of static production contrasts strongly to the 10-year preceding period when Milksolids production increased by 50 percent.
The number of herds has declined in the last ten years by 12 percent but this has mainly been through herd amalgamation. A modest number of small dairy farms have changed to beef. A few dairy farms have sold to horticulture. Less nitrogen fertiliser is being used since 2019/20 with the most recent decline since then linked to environmental limits imposed in mid-2021 of 190 kg N/ha. The genetics of the national herd have improved, with this explaining at least part of the higher production per cow.
Despite current high farmgate prices for milk, I see no evidence that farmers will increase production in the near future in any significant way. Profits will be mainly used to reduce debt, to make further cost efficiencies, and perhaps to invest elsewhere.
In the longer term, there are looming issues relating to ongoing pressures to reduce nitrogen leaching and greenhouse gases. These issues are not going to disappear.
My own judgement is that the dairy industry will deal with these issues with a range of technologies and management systems, but it will be hard work. These changes will probably allow current industry output to be retained but it is difficult to see where major production increases might come from.
This suggests that any major increase in the export earning category will have to come from increased market prices for quality products.
The focus of Fonterra, which markets some 80 percent of New Zealand’s milk, is on ingredients which are either sold as commodities or alternatively sold to major food-service companies, where once again they are used as ingredients.
In recent years Fonterra has become very efficient as a producer of these ingredients, but has publicly acknowledged that it has struggled from within its co-operative structure to earn the profits that it seeks from consumer-branded products. Its current plan is to exit from the consumer business.
Here, I am not going to get into the debate as to what Fonterra should or should not do. I could easily write a complete article on that issue alone.
Here, I am simply saying that the Fonterra Board has made its preference clear, that it wants to get out of brands. Also, I expect that Fonterra farmers will support their governance board on this matter. Also, consumer brands are a fundamental component of value-add strategies in any food industry.
Given these realities, even if it is the right decision for Fonterra to get out of brands, that is not necessarily the right decision for New Zealand.
Accordingly, will urban New Zealand step up and invest if Fonterra decides to publicly float its consumer business on either the New Zealand or Australian stock exchange? Alternatively, will this consumer business be offloaded in a trade sale to an overseas entity? I fear that the latter option is the most likely.
At this point I will try and summarise the complex issue of dairy’s future as an export leader for New Zealand.
The starting point is to acknowledge that the New Zealand economy would be devastated in the absence of the New Zealand dairy industry. There is no alternative New Zealand land-use that can come near to dairy in terms of converting the sun’s energy into export earnings.
Most New Zealanders have minimal understanding of the economic debt they owe to the dairy industry, and the high-quality lifestyles, apparently unrelated to dairying, that it has made possible.
Similarly, most New Zealanders have no conception of the river of dairy-productivity improvements that flowed through the industry in the first 15-year period of this 21st Century. Alas, in the latest ten years we have come across natural resource and biological limits that have made current and future progress much more constraining.
In that context, the first priority is to ensure that the fundamental role of the existing dairy industry is acknowledged. The next priority is to recognise that the next steps, in a country with a rapidly growing population combined with a constrained natural-resource base, are very challenging. Quite simply, there is no way that dairy can carry the load of underpinning the ongoing increase in exports required to fund the increasing import demands of a rapidly growing population.
In my next article I will continue the search for export industries that can pay for New Zealand’s unpaid historical lunches and also pay for lunches of the future.
*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.
75 Comments
And that folks is why NZ is going backwards.
We still think Agriculture will make us rich, but it is showing us that it is no longer growing enough for NZ to pay it's way.
An uneducated, unmotivated workforce and mindset, happy to come second and look good, instead of fighting to be winners.
NZ needs to get moving with other industries as well as relying on low tech ag.
And the racism in NZ is destroying us.....
Bit primitive, but thanks for that.
Racism is very much alive and well in NZ.
The "special" people, and some "white" saviour's and Luxon, think equal rights and duties for all citizens is racist.
NZ is on it's way to third world tribal rule.
Ditch the treaty (200 years out of date now), disband Waitangi Tribunal (grifters paradise) and treat everyone the same under the law (like every other first world country).
The treaty of Waitangi is a founding document of New Zealand's constitution.
Imagine telling Americans to tear up their constitution because a few people don't like it.
Its just not going to happen (quite rightly) so we will all just have to accept it and move on.
The treaty is "a" founding document, correct, among others, but not "the" founding document in any law. It is just a treaty of it's time. There is nothing stopping it being delegated to the past where it belongs.
The treaty is now being used by fringe maori to game the system to get more than anyone else, based on race. Disgusting!
New Zealand (not Aotearoa) does not have a constitution - so nothing to tear up. A treaty is just that, a treaty, nothing more.
Maori separatist wings are going to rightly get a clipping, at the least.
David Seymour's TP bill could form the basis of a constitution though.
And you choose to ignore the part of history that shows Māori were raping, killing and enslaving each other before colonisers came along....
Maori life expectancy in 1840 for a Maori was 25 years. Now it’s 74 for a Maori male, and 76 for a Maori female.
Maori should be paying the "colonises" for leap up in civilisation.
My point is maori are making up history to make themselves feel better. But the lies are easy to dispute.
- In 1816, a 15-year-old in France had a life expectancy of 58 years, while a 65-year-old had a life expectancy of 76 years.
Oh, sorry, another lie by a maori grifter..... NOT 25 years!
Fringe Maori = victimhood and envy.
And you choose to ignore the part of history that shows Māori were raping, killing and enslaving each other before colonisers came along....
Lol. It wasn't part of the conversation so I ignored nothing. Doing it within ones own "race" isn't racism is it. But this is a typical defence of the narcissist to justify their own actions.
Life expectancy for Pakeha wasn't much different and it was the introduction of diseases, "technology" and loss of land and resources that decimated Maori populations. Yeah, they should be paying for that.
You might want to do some further learning of history minus your prejudices. Your comments don't come across as very civilised.
History :
When 2000 Ngapuhi armed with muskets took the Mauinaina pa at Tamaki on 5th September 1821, the number of deaths outnumbered all the deaths in the intermittent tribal rebellions of the entire colonial period. The victors remained on the battlefield for a cannibal feast until driven off by the smell of decaying bodies of men, women and children.
Civilised, eh bro.
Maori were self-destructing, engaging in infanticide, cannibalism, plunder, and war. In effect, they were drunk on war and out of control. It would be accurate to say that they were a very dysfunctional people group. Between 1800 and 1840 the Maori population went down from 150,000 to 75,000. This was Maori killing Maori in what’s known as the musket wars.
Vote for the Treaty Principals Bill to stop the maori lies.
bjr8
I do not agree with your term 'low tech ag'.
NZ ag is actually high tech, with electronic sensors, for example widely used in irrigation monitoring, animal collars, and meat processing.
The general community has a very low understanding of the extent of this technology uptake.
But in the last ten years the technology focus has shifted away from production volume to more efficient use of inputs.
KeithW
"using electronic sensors" does not in itself make Ag "high tech".
I use a computer too.... and I am no tech wiz.
The progression of countries from primarily agricultural economies to industrial and then to technology-driven societies represents a significant evolution in economic, social, and cultural structures.
I am not saying NZ Ag is low tech, just that we have missed the boat to build an prosperous nation while stuck on "1". Most prosperous countries
are on stage 3 by now.
In the early 90s government attitude was that agriculture was a sunset industry, that the future of NZ was "THE KNOWLEDGE ECONOMY ".
I think NZ has made pretty good advancements in the last night on 40 years, within that knowledge economy context. But unlike land, knowledge, technology, innovation are all readily transportable. My gut feeling is that few of those achievements have stayed in NZ. Instead at a certain scale they are sold offshore and the long term benefits accrue in different countries, not NZ.
I also think that in some cases where these innovations have stayed in NZ, it is because of altruistic commitment to keep the business in NZ - Weta Workshops comes to mind.
Perhaps there is a reset needed in the superannuation policy that specifies a percentage of invested funds must be invested in NZ to grow the capital pool to allow those "knowledge economy" innovations to up scale and be retained on NZ soil.
In the meantime, primary industry is the bread and butter creating a pretty consistent core export revenue flow into our economy.
Great article and great comment Keith. Unfortunately a large percentage of the population still think of farmers as just a bunch of red neck hicks! Farmers are actually early adopters of new tech as long as they see it will provide improved efficiency and/or improved profit. Tech take up would be even greater if the rural community had access to fibre broadband! Despite all the propaganda from the telcos, rural internet is generally very poor!
It's interesting that the lactose in milk solids is not considered to be very valuable. It makes up as much as 50%. I assume because of other cheap sources of sugars.
I'm hoping the world will catch on to the health benefits of protein and fat, not only found in our pasture raised milk solids, but in our meat as well.
It's disheartening to see Fronterra doesn't want to be involved in value added products, and is actually aiming to produce commodity items.
That feels like a path to penury via ever-decreasing margins, and reads like enterprise, entrepreneurship and imagination are dead in one of our largest companies.
Are you sure the products they want to be involved in aren't "value added"? Fonterra Brands has not exactly been a star performer over the years.
I'm not sure who, it may have even been Keith, once pointed out that Fonterra biggest attribute wasn't as a manufacturer or seller of products, but as a logistics company. Not sure how much more juice they can squeeze out of that though.
"There is no alternative New Zealand land-use that can come near to dairy in terms of converting the sun’s energy into export earnings."
Horticulture is the obvious alternative but the distance to markets is the killer.
How about focusing on becoming the food basket of Australia - they must be coming up against limits with climate change.
Australia is an exporter of dairy and meat, which are New Zealand's main food exports.
New Zealand does export kiwifruit to Australia.
The six food categories in which Australia imports more than it exports are seafood, processed fruit and vegetables, soft drink, cordials and syrup, confectionary, bakery products and oils and fats.
These tend to be the same categories in which New Zealand imports food. For instance, in my kitchen cupboard there is tinned salmon, tinned apricots, tinned peaches, tinned tomatoes, beans, rice crackers, multigrain crackers and some Mother Earth products. All are imported. And that is just the start of the list. Marmite is one of the very few products in the cupboard that is manufactured in NZ, albeit with both 'local and imported ingredients'.
Food imports to New Zealand in 2022 were $8.5 billion. Approximately one third of these food imports come from Australia.
KeithW
Also, consumer brands are a fundamental component of value-add strategies in any food industry.
That all depends. If we look at Oatley, you could argue that their brand and marketing tactics are on song. But how is that translating into sales and a viable business model? They're not.
Zespri is being heralded as another example of brand-led marketing and business. To some degree, I would agree. But that's because nobody else is interested in branding kiwifruit. Zespri kind of has a monopoly in branded kiwifruit. And do consumers really care anyway? To be honest, if a kiwifruit is 50% cheaper on the shelf and grown in China, does the shopper really care? My assumption is that they don't, particularly if there is no discernable difference between the taste experience of Zespri and the el cheapo from China.
Westgold butter seems to be an example of a brand that's cutting through. But that's because it's a very good product to begin with. Most people that try Westgold like the taste and would buy it again. Very much a product-led brand.
Zespri has global plants variety rights on all SunGold kiwifruit through to 2037.
Yes. And non-Zespri gold kiwifruit is already being distributed and sold across ASEAN at 40-50% lower shelf prices. MFAT/NZTE should be understanding these issues.
Westgold butter is manufactured by Chinese Company Yili in its Hokitika factory from milk supplied by West Coast dairy farmers.
I'm guessing Yili knows that a good product (sensory factors like taste, texture, etc) drives the brand in the butter category. For a while (and maybe still the case), Westgold was the #1 foreign butter brand in Japan. Their brand activation across Asia is probably something that Fonterra could learn from - if they were proactive. It's no secret that Fonterra has struggled with sales strategy across Asia markets for branded consumer products.
There are some gold kiwifruit varieties that do not come under the Zespri SunGold category of plant variety rights. They are indigenous to China. Anyone can grow and sell these varieties. I have eaten these when in China. There is also some SunGold variety that is grown locally in China and sold in China without Zespri authorisation. I have written about that on multiple occasions in the past. Some of that could slip across the border into other South East Asian countries in small quantities but anyone involved at scale in such a trade would be taking a big risk.
KeithW
While you could probably write a very large book on the subject of fonterra getting out of branded products it probably needs elaborating what this means. In particular what is often referred to as commodity products are not necessarily cheap and it's a huge misnomer to only use two of the major components to price milk when though processing Milk manufacturers break it down into hundreds.
Best scenario would be for other Kiwi to buy the brands and make heaps of $$$$ from the investment ( money and mouth scenario ).But like you Keith I only see it heading overseas along with the $$$ and a worsening BoP.
While you could probably write a very large book on the subject of fonterra getting out of branded products it probably needs elaborating what this means.
Fonterra already has branded product for the food service channel - Anchor Food Professional. Seems to me that Fonterra also has a strong innovation team working on products to be positioned for bakeries, restaurants, hotels, and catering services in 2nd-tier Chinese cities.
Yes. B2B branding and marketing should not be underestimated. Less about nebulous spending on advertising and much more tied into customer relationships, innovation, and sales. One company that does it well is Puratos, an international group that specializes in providing innovative food ingredients and services primarily for the bakery, patisserie, and chocolate sectors. They have at least 6 product brands - Belcolade, Carat, Sapore, Acti, Chantypak, Smoobees. And Puratos itself considers itself a brand with a mission to create innovative food solutions that enhance the health and well-being of people worldwide.
It would be great to see an article from you Kieth explaining the rational behind Fonterra's decision to move away from consumer brands. I still can't figure out why they've done it. My assumption is commodities is our strength via favorable climate. Consumer products and marketing too hard to compete against the big companies like Nestlé.
The problem is distribution. How does a Fonterra branded product get shelf space, on an ongoing bases, in a German supermarket (for example)? It is not possible for single company to get overseas distribution channels set up, maintained (staffed), product delivered and sold without huge capital outlay and a severe effect on the bottom line.
Years and years ago bought AFFCO shares at 28 cents each due to them restructuring (closing overseas sales offices and relocating glitzy Auckland HQ to Ngaruawahia) due to a billion dollar top line and a miserable 100K bottom one. No money if value added products.
We need large professional distributors to "sell" New Zealand products. Classic example is Fijian Water. Going nowhere until the distribution was picked up by The Wonderful Company (I kid you not) and now Fiji Water outsells Evian water worldwide.
https://www.wonderful.com/who-we-are/
New Zealand has an over abundance of fresh water yet with no company willing to set up distribution channels to market, deliver and sell world wide. This is why water bottling locally is done by Chinese companies for they have the distribution channels in China and South East Asia.
So who could we get alongside to market and distribute New Zeal;and products? New Zealand does not have the resources (people, money or desire) to market and distribute wares world wide, we need professional help with deep pockets and established resale contacts.
Immigration and a high birth rate by both Maori and Chinese ethnic groups will eventually destroy this country.
And we should go back to basic economics: to give a basic example, let's say that our static export income is a cake the feeds a population of 12 i.e. each person gets to have one slice equal to a 1/12 of that cake. We then allow 12 immigrants into the country that effectively doubles the population so that now each of the total population of 24 only get a 1/24 slice of that cake i.e. the share of the 12 original inhabitants is now halved.
QED
So you're saying the immigration of settlers and the high birthrate of said settlers destroyed the country?
I doubt it, streetwise thinks a lot deeper than that. They're likely saying that given where we are today, further immigration and population growth will result in a poorer standard of living for everyone here (on average). As per the article, Keith correctly states we have to increase exports or decrease imports and the former may not be an realistic option. So that leaves reducing imports or population to get 'wealthier' on a per capita basis. I'm all for limiting imports which includes eating our own high-quality food for example. I also have stated on here a few times that I think we could export just as much with a few million people less, i.e. the last 20 odd years of population growth and do not buy into the need to grow our population one bit. Yes, if we got too low then we couldn't do the manual export work, but we've got 100,000's on the dole and millions doing nothing to assist exports. But sure, live out your days in the 1800's counting the costs and ignoring the benefits NZ and its residents have received from the trade the settlers brought with them. I cannot fix anything from the past because who knows how Māori would have done if the English had turned their ships around leaving the door open for..., however, we can try and make the future better and fairer for everyone and that's what I see streetwise's suggestions as attempting to do - even if I may have worded it slightly differently.
Using your example and assuming a static GDP per capita, shouldn't each man, woman and child be receiving the equivalent in income?
No, because they are two different concepts. One is how much income we theoretically *could* each have on average and that is quite different to whether or not everyone *should* receive an equivalent income. And that's before you define equivalent. I can get by on much less than most people - does that mean I should receive less 'income' because I am better at managing it and don't drink or smoke? BTW, I'm in favour of a UBI to replace current welfare interventions but I am also under no illusion that it would make everyone 'even' in terms of outcome.
Oh I understand what streetwise is saying, yet there's elements of hypocrisy, contradictions and double standards. There's elements of blame on a group of ethnicities, which misplaces our attention on root causes, and best actions both as individuals and collectively.
Note my comments are expressed as questions, not statements of truth, right or wrong.
As for my GDP question - that's the common metric for our economic growth and the "wealth" of the nation, and how it's disbursed or shared creates inequalities. Of course it's not going to work how I've outlined it. It does bring us back to the concept of "from each according to his ability, to each according to his needs". I'm simply highlighting that many of our economic metrics measure nothing worthwhile or of substance.
Obviously we're spending more outside our country than we're receiving and that's a structural flaw we don't appear capable of addressing. I'm all for improving the future for everyone, yet it would appear our fear of being poorer in economic and material terms is holding us back. We're unable to see that we could be richer in other tangible ways. In many ways we're already poorer than we were 30 - 40 years ago, yet we're the wealthiest we've ever been.
We keep repeating the mistakes, and doing things the same way expecting a different result.
Completely agree meh.
I was more about defending the notion that our 'prosperity', especially when 'measured' by GDP per capita, has been hampered by growing our population. I think streetwise is correct to put our population growth on the table, specifically the immigration part that we *could* have complete control over. Our own NZ born people need looked after first and I'd agree that doesn't mean dollars in the bank, but it does mean food, shelter and security.
"In my next article I will continue the search for export industries that can pay for New Zealand’s unpaid historical lunches and also pay for lunches of the future."
Do you consider aquaculture as part of the Agrifood sector?...and if so would that include onshore as well as offshore?
Enjoyed that Keith.
It's an interesting challenge the current account deficit. Our primary income balance (money flowing into offshore ownership) is about 7% of our $200bn net investment position, that's about $14bn in 2024. As you say, we have to balance this with a trade surplus on goods & services just to stand still.
Of course, we 'pay' for our current account deficit by expanding our domestic balance sheet - increasing either Govt or private debt. Basically, Govt and the banks take it in turns to top-up our domestic bank accounts so that we can shovel dollars (and then bonds) into offshore ownership without getting obviously poorer. You can see this dynamic clearly here.
RBNZ, Treasury, and the IMF are forecasting that our current account deficit will come down to about 3.6% of GDP by 2029. That's about the same as our primary income balance currently. So, they are either expecting our international investment position to improve (how?) or they are expecting us to balance trade on goods and services. This all seems wildly optimistic to me - unless oil prices collapse, which looks unlikely!
Jfoe
I agree that the (unstated?) assumptions behind the IMF projections as shown in the linked graph need close scrutiny.
The basis of those assumptions lie beyond monetary economics.
And therefore in all likelihood the monetary economists at the IMF have not considered the reliability of those starting assumptions.
Both this and my previous article could be framed as efforts to explore the likely validity of starting assumptions they appear to have made.
KeithW
Interesting article Keith. I think the challenge NZ faces is akin to the 1870/80s Long Depression. NZ faced a turning point in its economic history. Growth from extractive industries - whaling, sealing, native timber, kauri gum, gold, etc had peaked. A new model was needed. Technology in the form of steam engines and refrigeration provided NZ with the means to export temperature sensitive butter and lamb around the world. It has taken us a hundred and fifty years to peak out this economic model. We have had a good run but now we need something new.
What technology could provide growth going forward?
I think a couple of promising areas are agrovoltaics. Using NZs land supply and sunshine hour resources more directly. I wrote a little bit about this here. https://www.interest.co.nz/public-policy/129844/brendon-harre-looks-ene….
Also there are some interesting developments in forestry where value is added to pinus radiata to make it more like a durable hardwood (Accoya) or to make it denser and stronger like steel (MettleWood). It is earlier days for these industrial developments, but NZ should be trying to be part of these industries.
Accys recently opened a second plant in the US (the original factory is in the Netherlands) to make Accoya. It source wood material is pruned NZ pinus radiata.
MettleWood is even newer but its potential is greater. The holy grail innovation that InventWood the makers of MettleWood are trying to achieve is the ability to make a steel I beam. Currently lots of new products appear possible and the Maryland University start-up has been commercialized and is building a large scale factory, with production due to start in 2025.
https://www.woodworkingnetwork.com/news/woodworking-industry-news/new-f…
Here is a video link from a wood trade event that shows some MettleWood products and discusses the direction InventWood wants to go.
Here is another video about agrovoltaics. I don't completely agree with the authors more socialist perspectives, but he does make a compelling case for the global importance of agrovoltaics.
Very pertinent observation in that refrigeration in the 19th century galvanised the meat industry into a huge and vital earner and particularly sheep, introduced for wool of course but now the whole carcass was being utilised. Still it needs to be noted that the large British concerns, Vesty, Borthwicks, Swift, Dalgety and others were soon in on the act and that expertise, investment and management provided much of the requisite industrial plant and hardware. In effect NZ became an off season supplier to the home country. That arrangement and operation basically remained in place until the UK entered the EEC in the 1960s. Recall working in the overseas dept of a trading bank in the 1960s, the export bills of lading for the UK were captioned homeward bound.
You should ask yourself why a product (process) like Accoya was invented in The Netherlands. A country with a forestry aerial smaller than the Whakatane District. I believe forestry in New Zealand is a big underachiever with their simply solution by just exporting 60% of their harvest as unprocessed logs. A tree is build up from cellulose and lignin of which the value has been recognized long time ago in the Nordic countries. Those countries achieve up to 6 times the value from a tree than New Zealand. Finland exports only just over 1% of their harvest as logs.
NZ actually invented a good part of the underlying Accoya process. But we weren't able to do the 10+ years of production development to commercialize it. So, Scion sold their acetylation intellectual property to Accys in 2006. It has taken Accoya well over a decade to establish a strong foothold in the market. It was only last year that Accys was able to open a second production plant in the USA.
NZ research institutes partnering with NZ companies do not have the long-term patient capital capacity to progress innovation in this way.
https://www.nzherald.co.nz/nz/new-zealand-tech-turns-pine-into-hardwood…
https://www.nzherald.co.nz/rotorua-daily-post/news/revolution-looms-aft…
Probably. Andrew Coleman on Interest.co.nz has made a compelling argument that NZ's taxation system and retirement saving system is over investing in land and houses which pushes up prices and creates unnecessarily fancy housing (I think the RMA, planning/local government system, and the infrastructure deficit reinforces the inflation process to create a housing crisis by constraining supply). Overall if I understand Coleman correctly this means that NZ relative to other countries has a reduced savings rate and less capital investment going into areas that would expand the productive economy.
The govt could borrow money to beef up kiwibank to compete with the Aussie banks. Then we are at least importing " wholesale " interest rather than "retail" interest.
Import substitution sounds a bit communist, but it is crazy we are importing many foods we could produce ourselves.
The wood products Brendon mentions could replace a lot of imported steel, and to a lesser extent concrete.
The big elephant in the room is carbon credits, and what it will cost us to import them. Strange that 20 years ago we were talking about the potential to export them.
Where's our creativity and ingenuity gone? Why are we not exporting finished pine products instead of logs? Why are we exporting milk powder and not finished higher value products? Hemp could replace many materials and it's been proven to have many environmental benefits.
Are we not capable of scaling up or have we simply priced ourselves out, sold out?
Where's our creativity and ingenuity gone?
Still plenty here, but we're all swimming in different directions.
Why are we not exporting finished pine products instead of logs? Why are we exporting milk powder and not finished higher value products?
Why would someone buy our furniture made with NZ wages when we're happy to sell the logs to them? Ditto the dairy although I'd fancy our chances better there than the logs since the raw products currently end up in higher value finished goods. Trade is a very double-edged sword when your country plays by the rules too...
Are we not capable of scaling up or have we simply priced ourselves out, sold out?
I think we could although we have built in artificial costs to production such as going into debt in the name of our 'higher than they would be' land and construction prices, so higher wages needed too... So, we have sold out to the FIRE sector for sure and been voting accordingly (as a country at least - I suspect you may be one of the exceptions). We're trying to borrow to build a factory instead of using surplus savings to build a factory. We enjoyed eating the cake, shouldn't be a surprise there is no cake left in the tin.
Why would someone buy our furniture made with NZ wages when we're happy to sell the logs to them
Yes indeed.
"New Zealand is exporting increasing volumes of lumber to Vietnam, now the world’s second-largest timber furniture exporter – with NZ-based Radiata pine is being used to build stronger and more durable furniture."
https://woodcentral.com.au/hello-vietnam-nzs-radiata-pine-now-fuels-glo…
As long as we keep pumping land, house and asset inflation, thinking it makes us rich, the more overseas debt we need, and the more interest and profit repatriation required. If we don't change this, nothing changes.
We're doing it to ourselves and primary industry is just as guilty. At least they can semi justify their contribution by arguing their offset.
The next thing we export will be houses, going by the recent Oneroof article about RE agents frothing over the possibility of loosening the foreign buyer ban. And what will happen here - the market will simply push up prices to reach the theoretical $5M threshold. This will not benefit us as a whole.
On a side note, let's start using our language better. We've been brainwashed with financial jargon. "Capital" has been given a false power and idolisation, when it's simply land, people or debt. Start valuing, revering these better and differently and we'll see societal improvements.
I think we can be super high tech, I think RocketLab just proved that.
Its just NZ is not the optimal place for any great high tech business to probably sit long term.
Sure RocketLab will have an office here to harvest our best young talent with an opportunity to enter a winning global high tech, but their future is ... offshore.
Show me another 10 RocketLab's and I will show you another ten startups whose IPO will most probably be on a US equity market and will move HQ there very soon after. We cannot hold hot talent in NZ world, when the market is huge and the market wants you in the USA for security or other reasons.
Our best talent in STEM heads mainly towards the US, the non-STEM talent towards Aussie. This includes lots of tradies,
So if NZ cannot hold STEM or nonSTEM or Tradies, how are we going to build new industries worth building.
early talent was supported through post grads coming from university of Canterbury engineering school. Rocket lab funded some of these places from what I recall. Being part of 5 eyes means rocket lab will continue in nz but more sensitive payloads will be pushed out through USA facilities. Hopefully some revenue from this operation finds its way back to nz!
I don't really understand why software and software services is not encouraged to become a much larger market than it already is. Maybe I am biased as it is all I have ever worked in in this country, but to me it seems like the biggest no brainer. We have fibre everywhere, and software is the antithesis of New Zealand's main export woes (distance). With the NZD/USD value, english fluency and desirable timezone to the States (especially in summer, only 3 hours behind the west coast) I don't get why we aren't selling ourselves as your off-shore development / support with none of the usual downsides of off-shoring talent (cultural / language barriers). Why does Meta pay a junior software engineer almost $500k NZD [1] in the States when you could pay for the equivalent experience at 70-80k NZD in Auckland? Sure, you may get "the best" at that price but with the AI tooling available, aren't you just overpaying for a junior these days?
Not just selling bodies but we have a knack for dominating entire software sub-industries. For example NZers created 3 reasonably big players in Inventory Management software (Cin7, TradeGecko (RIP) and Unleashed). They're no Atlassian or Canva, but we have and can do that too (Xero and Vista). Ignore the eventual seeking of capital abroad, even Aus has that problem.
Maybe it's too late anyway - Mark told Joe Rogan they will instead use AI over hiring junior engineers going into this year. At that price i would understand why. But maybe during this global transition we are well placed to offer a competitively priced "real" intelligence alternative.
[1](https://www.glassdoor.com/Salary/Meta-Junior-Software-Engineer-Salaries…)
nzboy,
According to the figures I have seen, software-as-a-service earned us some $3.60bn in 2023, mostly as export earnings. Research from Sense Partners suggests that the sector is on track to hit almost $10bn in earnings by 2030, creating some 50,000 high-paying jobs.
Alternatively, will this consumer business be offloaded in a trade sale to an overseas entity? I fear that the latter option is the most likely.
More future dividend payments going overseas in that case. Just going the same way as the banks, the majority of insurers and others.
Yes, would be great to see if they can float it or get some local investment rather than trade sale to MNC. Brand’s business does conflict with their MNC customer base for ingredients so future export value capture would come at existing customer expense. Hart must be sniffing around at this to fold into Walter and wild? What is tue brands business worth?
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