By Alex Tarrant
When a Cabinet Minister references the government’s goal to boost exports as a proportion of the economy, and the rise of augmented reality within a few breaths, it’s hard not to combine the two in a headline.
It’s also hard not to cast an eye around to see which other goals set by the government might be suffering from a case of augmented reality. Climate change and the environment could be in there, given this week's events.
Let’s get exports out of the way first. Economic Development Minister Simon Bridges and Finance Minister Steven Joyce last week announced a ‘refresh’ of the government’s Business Growth Agenda (BGA).
This is a document that pulls together a bunch of Budget announcements and handily puts them in one place to indicate the government’s ‘business growth’ plan over the next few years. It has encouraged Cabinet Ministers and senior officials to get around the same tables for more intensive and productive policy making.
The business community loves it. And Crown entities in their statements of intent have a handy reference to attach their own goals to. It was well-received by a Trans-Tasman business audience Thursday, despite a few hiccups including Joyce forgetting who provides ‘Pacific’ input in Ministerial BGA meetings.
The agenda includes the government’s famous promise from 2012 that exports as a proportion of GDP should rise from 30% to 40% by 2025. It’s famous because there hasn’t been any movement – we’ve been stuck there. Bridges still sought to explain why we could “hold our head up” on that non-progress.
“In the face of the GFC, hostile global trading environment, actually exports have grown. What’s also true, of course, is that the economy in general – the domestic economy – has grown, so we’ve stayed at around 30%, but we have held our own.”
A 2012 Q&A on the goal had this to say about what was required: “Achieving our 40 per cent target will require a shift away from the production of goods and services for the domestic economy, and towards international markets. It will require investment to flow to opportunities in the export sector, as well as the ability of labour and skills to shift in response to changing demand.”
A minute later, Bridges was on to augmented reality. That morning he had paid a visit to Weta’s augmented reality team. In a room with a nice leather couch, Bridges was handed some goggles with a screen embedded which showed the exact same room.
“But what comes through the goggles is all these freaking spiders. And fortunately, I had a couple of guns, and I probably blew my foot off several times. But if you’re looking up there and you start shooting these spiders and they splat, that’s great but then there’s all these other ones coming from the other side.”
The message he was trying to get across: Weta are now world-leaders in augmented reality. It is a good news story. These goggles might replace cell-phones, augmented reality could help in the medical sphere, the gaming industry, you name it.
Augmented reality on climate change
But Bridges’ anecdote helpfully segues into the more important news of the week. Speaking of augmented reality and shooting oneself in the foot, it looks like a pair of those goggles managed to end up in Climate Change Minister Paula Bennett’s office.
Parliamentary Commissioner for the Environment Jan Wright on Thursday warned that climate change is the single biggest inter-generational issue facing New Zealand, smoking the superannuation debate.
To meet our 2015 Paris Agreement commitment of reducing emissions to 30% below 2005 levels by 2030, New Zealand’s emissions need to stop growing right now, Wright warned. And on current policy settings, she can’t see that happening.
As I wrote last week, most of our government’s eggs seem to be in the basket of hoping we’ll be able to sign up to a bunch of international carbon credit markets with other countries so our emitters can tap (cheap) overseas units. This will supposedly ensure a ‘cost effective’ way of meeting our Paris target by way of offsetting emissions rather than working too hard on reducing them.
But both Bennett and Wright said there was no guarantee of this international agreement happening. Talks are still early stage, and there’s so much sensitivity around the discussions that our government is tweaking out any mention of them in reports released publicly.
To me, the situation looks like it could be a serious case of augmented reality.
Bennett was quick to disagree on the eggs-in-one-basket assertion. If we can’t sign up to those international markets, she’s confident we’ll still be able to meet the goal.
“When I just look at what we’re going to be doing as far as more renewable energy, the use of electric vehicles, technology and advances that are going on on-farm, there’s just such a great range of things that we can do, and you’ll see more of that as it’s mapped out over the next year,” she told me.
As agriculture accounts for roughly half our emissions, the government’s work and track record on that part of the equation should be the canary in the coalmine then for how all that other work is progressing. Good fate then that Crown entity AgResearch recently released its statement of corporate intent for the next five years to tell us how things are coming along.
These guys and girls are a central cog in the machine producing the science that’s supposed to help make our animals more productive, allowing for reduced herd sizes. This is important for the environment in terms of waterways, but it also applies to reducing emissions. You don’t need to read further than the chairman and CEO’s executive overview (see below) before you get the shakes.
Underfunding has meant investment in this scientific area has fallen well below the national need and consequently, the important national science capability at AgResearch and elsewhere is at risk, they said. A re-think on how we approach this area of our climate change research & development is needed.
This is goggles-off territory. It is cold, hard reality. It seems 2030 is closer than we think.
Against this exciting and progressive backdrop, we confront challenges about the retention and enhancement of scientific programmes that will tackle the interface between farm systems and environmental challenges this country faces.
Areas of on-farm and environmental science capability that we and our stakeholders believe are critical for New Zealand to achieve sustainable environmental improvements, are coming under significant funding pressure.
We believe that a re-think is required to consider how on-farm scientific innovation in New Zealand needs to drive the growth of our primary sector exports, while meeting the escalating aspirations of our communities for cleaner, more useable lakes and rivers, to ensure that these critical areas are financially supported and effectively executed.
Like citizens everywhere, New Zealanders want the benefits that flow from a prosperous economy – good health care, education, infrastructure and career opportunities for themselves and their children.
In New Zealand that prosperity over the next decade and beyond will be driven by the growth in value of exports from our primary sectors. Two relevant examples are the government’s target to double the real value of exports from the primary sector by 2025, and investment towards achieving irrigation schemes and the Primary Growth Partnership programmes.
On the other hand, citizens of every country also identify sets of non-economic values that matter to them and this varies more widely between countries. In New Zealand, this most frequently relates to the quality of our environment and especially our ability to access and utilise those resources for recreation.
Combined, these challenges present a national conundrum. How do we grow the value of our primary sector exports while also meeting the escalating aspirations of our communities for cleaner, more useable lakes and rivers?
In our view, we are now at a point where we are concerned that the investment in this scientific area has fallen well below the national need and consequently, the important national science capability at AgResearch and elsewhere is at risk. We have elected to retain this capacity while we, Government and our sector work through how this on-farm research, which has significant private and public benefit, is resourced and completed.
It is a challenge that requires a holistic approach to answer, and that is why we at AgResearch have instigated the necessary conversations with the sector and the Government to reflect on solutions for what New Zealand needs, who will pay for that and how it is best carried out. This will allow AgResearch to make the necessary decisions to best position its science capability to meet the future needs of the sector in these areas.
Until we find the best solution with Government and key industry stakeholders, AgResearch will commit to maintaining our critical science capacity. This, in conjunction with one-off costs related to the new facilities development programme, will result in a forecast net loss before tax in FY18 of $11.4 million.
As we address these challenges, AgResearch will continue delivering its science excellence and remain focused on enhancing the value, productivity and profitability of New Zealand’s agricultural sector.
31 Comments
Two issues: failure to meet export targets and failure to meet climate change targets. The governments tactics being to change the subject for the first one and keep everything confused on the second one.
Despite the best of efforts with google I simply cannot find an authoritative source of info about our climate change targets: I have been led to interesting reports on how we might meet the target and there are gov stats with a graph showing what our MTCO2eq emissions have been (doesn't look too promising). I cannot find anything that explains what will happen if we miss the target - in other words how much will it cost each taxpaying family for each MTCO2eq over the limit. There was a figure of $14billion in 2030 in a news report in May but I cannot find anywhere how they pluck that number out of mid air nor whether we all wait until 2030 and suddenly have a tax demand of about $10,000 or if it will be billed year by year nor what the cost in 2031 and each year after will be.
It does seem as if the government made one mistake when signing the Paris agreement - it did not commit on a per capita target. Population growth is obviously a major factor - if you aim to save 30% then a population growth of 2.1% this year has suddenly made the target not 2.1% bigger but potentially ~7% bigger and of course if as is planned we bring in another 220,000 in the next four years and expand tourism it will get harder and harder to hit the target.
It will be interesting to see if a future government will play the Trump card to our Paris commitment.
Exports: our economy is distracted by population movement to the cities and unusually high immigration. Each new person in Auckland creates increased demand for houses, roads, schools, hospitals, etc and that new infrastructure creates multiple jobs until the newcomer is well settled. So we have a booming economy dedicated to supplying immigrants (NB like myself). So despite the best efforts of farmers exporting comparatively unprocessed (milk powder, logs) resources exports do not grow.
Weta's augmented reality could grow but it is unlikely to dominate the world market for long - too much competition but lets say they along with Rocket labs are lucky will they just be like Canadian Blackberry and Finland's Nokia - just short term successes and of course if they do grow to dominate the world will they stay in NZ?
For NZ exports to grow from 30% to 40% we need investment in processing our natural resources - we export bottles of wine not grape juice and we could export furniture not logs, fancy cheese not milk powder. NZ is full of Kiwis with the technical knowledge, the overseas contacts and the sheer grit required to develop profitable export businesses but our banks find it easier to invest in houses and our government doesn't support or encourage the research needed to build exports industries.
It is naive to think we could make 'furniture instead of logs'. If we did, you would need to export it, and the freight on furniture from NZ would kill its competitivenss (completed furniture is all air and packaging). Secondly, we export about 18 mln m3 of logs a year, most of which is used for construction boxing for concrete. The volumes we have would be far in excess of what Ikea would ever need, so it is silly to just assume we could convert NZ logs into a business larger than Ikea. Thirdly, some NZ logs are used for furniture (if you read our log reports you will know how Radiata pine is used). And fourthly, even Ikea does not make its flatpack furniture in Sweden. Most is made in China (and sold in China) - where most of our logs go. So to some extent, some of our timber is already used in Ikea furniture.
And then there is the question of building an export business that is only survivable if it get government help and subsidies (ie R&D credits), if the base can't survive without it. Business is only sustainable if it has a natural, inherently demanded product that can be made profitably. Throwing subsidies at it to keep it going would make the country poorer and enrich just a few cronies. You can be sure investors would dive in if there was a real commercial advantage for doing it here. Companies have been dabbling in furniture in NZ for over a century. There is a business reason none of them have become world scale. (And its not the lack of govt subsidies.)
Processing higher up the scale is a good idea but for NZ there are practical limits. Our real opportunities are not in goods, but in services. Still, there will be some businesses that can do it in goods (Icebreaker), but I suspect when they get orders in world scale, they won't be making them here, even if they are from NZ merino wool.
Still, its election year, and a simplistic 'make it here' message will find a market among some. If it had buisness merit, Winston Peters would be an Ikea billionaire. He has been promoting the idea for about as long as Ikea has been in business.
I'm happy to admit to being naive. I chose logs and milk powder at random - I'm fairly certain that the trees we grow for logs are probably not the ones that would be best for furniture so any change there would take say 30 years to achieve. I also agree than anyone can achieve exports by pouring government money (I mean your money and mine) into chosen businesses (who chooses - more Kim Dotcom, Peter Thiel ?). I can remember the De Lorean car!
My point remains: focus investment away from infrastructure and towards business - some will become export businesses naturally. Maybe all the government has to do is relabel tourism as an export business.
I do wonder if our regionally isolated and politically stable status could be used to NZ's and indeed, to the whole of humanities benefit. Are there intellectual resources that may be best protected here from events such as nuclear war? The Internets "cloud" may preclude storing digital informations but a herbarium of international value is one possibility. Of course some thought about positioning would be required to protect from possible earthquakes, floods and especially tsunamis with Northland being a possibility off the top of my head. Such institutions would require international funding and would provide jobs for scientists. If we become internationally valued enough, we may even be removed as a target for ICBM's.
We currently have a bullet proof, bomb proof, information proof kryptonite-kling-wrap biosphere enveloping Wellington protecting the beehive
This biosphere is particularly impenetrable to thought-waves and impermeable to inbound attitudes and views of the outside-dwellers of the outside hostile terrain. Those outside-dwellers have to be fed mushroom fertiliser and kept in the dark
Scientists and thinkers are vapourised
You make an excellent point about the relative shipping costs of raw logs versus furniture, but I wonder about finished lumber. There is even less "air" in that than in logs. Can the processing of logs into lumber not be sufficiently automated to counteract cheap overseas labour?
Some 2015 data I am looking at shows 59% of wood product exports were in the category of "rough wood", 21% "sawn", and most of the rest are various types of processed wood.
I imagine we are comparatively pretty good at the timber we use a lot of . fence posts, fence railings, rough sawn timber, kitset pole sheds, timber for packaging etc. Our pine is sustainably grown , eventually that should count for something vs strip mined tropical hardwoods. On the negative side , it needs chemical (H3,H4 ) treatment for most of the above applications. But I think we could compete more in that market , than something like furniture. the other one that springs to mind is biomass fuel such as woodfire pellets.
Very well stated David.
Having worked with large NZ based forestry operation for some years, your analysis is very appropriate.
The simple fact is that Radiate is seen as a low value commercial product - not generally used for high value end use markets. They prefer teak and hardwoods. Teak has been plantation grown for many years and could possibly be grown in Northland.
Our major markets want sawlogs - we cannot make cable drums etc here and export.
Clearwood can make mouldings - but again a commodity and we have to compete with slow grown, high quality SPF's ( Spruce Pine Fir ) ex Canada's wilds plus US Southern Pines that don't need pruning and are much close to market and very good quality. So lower cost production and in Canada's case no land costs - hence the current US claims of subsidies for sawn wood.
Just take a look at IKEA's main furniture production - mainly panels ex chip from sawmill slab waste and sawdust. Value is basically zero - buyers just pay the freight.
Look at the very poor returns from the NZ listed forestry companies over the years.
The reality is our forest products are commodities where as Buffett has stated - the only valid strategy is to be low cost delivered to market.
Take a careful look at sawmill economics in NZ - a huge number have gone under over the years. A very difficult business churning out a commodity products.
We are destined to remain primarily a log / panel exporter into the foreseeable future.
Thanks for the info - a good education about NZ timber. If there was a way of making more money from timber I expect a Kiwi will have found it by now. Only worry is maybe they have thought of say Teak in Northland but the amount of up front capital and the confidence required to plant now to exploit in your childrens lifetime will have stymied it. Much easier for a bank to lend money to a house-buyer.
One problem with forestry is once the land is planted and trees mature the land is thenceforth locked into forestry - forever - the cost of conversion back to pasture or horticulture or anything else is prohibitively off the planet
A number of radiatia plantation forestry blocks around my way have been let go - no pruning - no management - the owners have given up
Can't agree forests can be put back in to pasture - with a lot of grass unavailable P unlocked in the process. Look at Tok, Broadlands, Selwyn... Stump grinding is bargain compared to purchasing dairy pasture. Provided you are close enough to a port those no pruned no management blocks are still in positive return territory and in most cases superior to sheep. The losers are the ones who planted pines at the back of the farm and kms of access road to go in eating up all the returns - that outcome was fairly obvious at the day of planting. Just highlights the tyranny of subsidies more than anything.
Funny you should say that, drove past a smallish pine plantation yesterday and noticed that trimming had not been done, and the trees looked liked they were not all the same age and the older trees had none been trimmed either. They will only be any good for firewood, now, I expect
It puzzles me why aviation emissions and tourism get a free ride as far as climate change is concerned. Such an environmentally unfriendly activity, carried out for entertainment by the over-privileged. Even the Greens rabbit on about "eco-tourism", as if such a thing could exist - if aviation emissions were a country they would be in the top 10 emitters.
"Hour for hour, there’s no better way to warm the planet than to fly in a plane. If you fly coach from Los Angeles to Paris and back, you’ve just emitted 3 tons of CO2 into the atmosphere, 10 times what an average Kenyan emits in an entire year. Flying first class doubles these numbers.
However, the total climate impact of planes is likely two to three times greater than the impact from the CO2 emissions alone. This is because planes emit mono-nitrogen oxides into the upper troposphere, form contrails, and seed cirrus clouds with aerosols from fuel combustion. These three effects enhance warming in the short term."
http://www.yesmagazine.org/issues/life-after-oil/how-far-can-we-get-wit…
Tourists producing CO2 in NZ are our responsibility and the government should have thought of them before it signed.
I thought aviation was included. As I say it is hard to find an authoritative site that isn't pushing one agenda or another. Logically we should be held responsible for half of all aviation emissions on international flights. When I last tried to get my head around what the government has committed us to I vaguely remember about 10% of all petroleum consumption being for aviation. We can move to electric cars and solar electic generation and do a better job at stopping emissions from our waste but I cannot see a practical alternative to ever increasing consumption of aviation fuel - there can be very little room for efficiency improvements now.
The 40% export target is very strange and, as far as I can tell, is used as a loyalty test to screen public servants. Those willing to sign up to the target are those willing to go along with the government's aspirational narratives and are therefore unlikely to criticize the government; the others are less reliable.
In the decades to March 1997, 2007, and 2017 the average export/ GDP ratios were 28.5%, 31%, and 29%, and the import ratios were 26%, 30%, and 28%. (These figures refer to nominal GDP.) The only time the ratio has exceeded 35% was during a 2 year period in 2000/ 2001 when the exchange rate was under $45 cents US. It rapidly dropped when the exchange rate increased back to more normal levels. For most of the period since 2000 the Reserve Bank has chosen an interest rate policy that has produced a much higher exchange rate than $0.45c which mitigates against exports. The purpose is clear: when you have high non-tradeable inflation, some of which appears to be generated as part of a policy in which the population increases rapidly, you want to shift resources from the tradeable (export) sector to the non-tradeable sector. If the key shortage in the country is construction workers to build new houses, you need to convert workers in the export sector into workers in the non-tradeable sector, and the orthodox way to do this is to have a high interest-rate/ high exchange rate policy. The main alternative is to find a way of importing "non-tradeable" goods and services - for instance, by importing construction workers and construction imports - which is also made more attractive by a high exchange rate regime. The only problem is that the policy has yet to work quickly enough to meet the high demand for non-tradeable goods in New Zealand.
The government would have been much better to specify an import target - a way of importing things that New Zealanders are not very good at producing. Then perhaps the export sector might flourish, helped by a more benign exchange rate and set of prices.
Andrew, I could not agree more.
Singapore recognised this issue years ago and targets their exchange rate via currency board. We have the option of doing what we know works but no appetite from the Chicago school.
Right now the highest growth components are building and running prisons. Prison population up 21% in 3 years !
This should be an issue - but not on the average Kiwi's radar I fear. Exports or lack thereof not considered important any more.
Not sure what people think pays for our imports and interest on our foreign liabilities.
It's a NZ First policy;
Introduce a system of Managed Float Control of the exchange rate, as is very successfully employed by Singapore. This will ensure a certain and equitable trading environment for our producers and exporters.
One thing that really worries me in Nz at the moment is that urban people seem to be ganging up on the farmers about their environmental damage. Although a lot of this is warranted, nothing good will come from pointing the finger and trying to blame others. Farmers are really only doing what they have been incentivised to do by bad government policy. We all need to focus on our own issues first. Urban people really have the luxury of turning around and yelling at our council once we discover how environmentally damaging our current lifestyles are. Farmers have to make real change.
What we really need is bipartisan agreement on long term change for everyone.
National: realistically you need to lead this. If you don't, you could end up creating a very unhealthy rural and urban devide that Nz does not need.
Why do farmers pay too much for land?
Why is the Nat led lot not prepared to tell farmers that they have to sort out their environmental footprint and allow for that in the price of the land when sold? If a particular farm cannot be sorted then sell up and let the next owner have the obligation and at that time maybe put a caveat on the action and timing.
Telling somebody that "they have to sort out their environmental footprint" is meaningless and unenforceable unless you can both measure what their current environmental footprint is, and monitor whether and how it changes as a result of their efforts. Both are fraught with technical difficulty and cost.
Scion developed the acetylated wood process and sold it to offshore to develop.That radiata once processed will last for 50 years above or below ground and unlike tantalised timber is totally environmentally friendly. Some of the product has been imported into NZ for use inKFC building facades to name one. The material is ideal for timber window joinery because it does not warp. Why did we not further advance the process? Ignorance within government and lack of backing our science is a typical failure.
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