“We’re going to have to protect our market position by repitching our product; we’ve got to play in the high price bracket,” ANZ’s Cameron Bagrie told Dairy News after speaking at the Irrigation New Zealand conference last week.
Bagrie presented five options for New Zealand to address what he says
is an excessive net debt
at 72% of GDP.
“That’s how much we owe as a nation... We’re still running a current account deficit of 4% of GDP so we’re still heading further into the red. It’s a structural noose,” he told the 420 delegates.
He warned it’s “going to take a long, long time to address” and unless dealt with, we can kiss goodbye to our farms and other assets.
“If we continue to run a current account deficit of 4% of GDP the farms are going to go. We either have to borrow more money or sell off assets. That’s it.”
The good news is New Zealand’s wealth of natural resource capital, the highest in the world outside of the oil producing nations.
“Australia is the lucky country, but not as lucky as we are. They’ve got $39,000 of natural capital per capita to our $52,000. It’s a pretty sizeable gap.”
New Zealand does even better in renewable resources, he points out.
“In a world of increasing pressure on resources, being strong in the renewable capital list is where you want to be. That alone isn’t going to guarantee success... but it does give a good head start.”
What’s needed is a period of what he labelled “grumpy growth.”
“We’re at the hard yards stage... This is the most important period in New Zealand’s economic history for probably 50 years.”
Bagrie reckons there’s a 10-year opportunity to turn things around. “If we don’t get it sorted while the demographics are favourable, then we’re toast.”
Free trade agreements have laid the foundation to build on our renewable resource advantage.
“We have FTA’s in place with 29% of the world’s population and under negotiation with another 26-27%. That’s a statistic I don’t think any other country in the world is close to.”
But New Zealand hasn’t a hope of feeding 55% of the world and with countries such as Belarus starting to compete in bulk milk powder exports, “where we need to aim is the high value end.”
Doing so will help address the one OECD lifestyle ranking where New Zealand scores badly – income per capita. “If we don’t have the income to support the feel good stuff, then ultimately we’re on borrowed time.”
• More stories from the Irrigation NZ Conference in next week’s Rural News.
