Focus on productivity not capital gains

Farmers need to forget about making quick money through capital gain and instead focus on improving productivity and their cashflow to grow their wealth, National Bank chief economist Cameron Bagrie believes.He visited Invercargill last week as part of a National Bank rural roadshow to let clients know how things were changing following the global economic crisis last year reports The Southland Times. "New Zealanders need to accept that the economic model of the past 20 years, which is borrow and spend-style growth, is an unsustainable model."The rural sector needs to accept ... you're not going to see the big speculative asset price booms. The value of your asset needs to be determined by yield and cashflow." The economy was in a period of transition and it remained unclear what the new "normal" would be, but farmers and businesses needed to get back to basics, Mr Bagrie said. Many had become complacent because wealth was being created through asset growth and not productivity growth. "They ignored some basics, let their cost structures get a little bit out of control. He is confident New Zealand would come out of the recession well because it had "wonderful opportunities" and produced what the world wanted. "But we've got to change our economic model – it needs to shift away from one that is fixated with capital gain and shift to one that is more focused on yield and cashflow." The Government needed to introduce steps to help the earning sectors expand and avoid falling back into the old habit of "borrowing and spending our way to growth".