We should be more grateful for our geography and geology.
When the World Bank recently estimated the wealth of nations New Zealand came in 20th of 152 for total wealth per capita, and 8th for natural capital. The seven countries ahead of us were all oil producers, so their long-term position is precarious.
Arguably, a more important measure in a world of diminishing resources is a country’s renewable capital. New Zealand doesn’t just top the list for renewable natural capital per capita; we’re a whopping 50% wealthier than the next country on the list – Tonga – and nearly nine times wealthier than the global average. New Zealand’s endowment is heavily agriculture focused. Crop and pasture land make up half of our assessed natural capital. On a per capita basis this is double the next two countries on the list – Belize and Australia – and eight times greater than the global average. What’s more fish stocks are not included. When you add the potential for aquaculture in our exclusive economic zone (sea area 15 times greater than our land mass) there is a lot of potential wealth there also.
The world’s food challenge is unknown. You can only get so much out of a hectare of pasture or cropland. There are natural biological constraints. The supply curve looks even steeper when you allow for things such as urban creep, biofuel production, water scarcity, a more volatile climate and government intervention.
Productivity gains abound, e.g. biotech crops, new fertilisers and production systems. But by most measures the growth in yields in established food-producing regions and industries is diminishing. Inadequate reinvestment in farming during the last 20 years is retarding food supply. Overlay forecast population growth to 2050, plus the strong lift in real incomes in emerging countries, urbanisation, modernisation of emerging countries’ food industries and the shift to higher protein and fat diets... you get the picture.
The ASEAN trading bloc and other big players such as China and India are short of renewable capital, hence they are looking at agri investments all over the globe. New Zealand’s opportunity is not just in the sale and trade of premium agri-products, it is also in our expertise and services throughout the food supply chain. There will be more cross–border trading of food, especially in the Asia–Pacific region.
We have been exporting for a long time and we need to back ourselves in this; we are world class at many points on the agribusiness supply chain, and in the delivery of perishable products to faraway markets. Other countries need such expertise and services.
But there are tensions. Unlocking our renewable endowment is not easy. You wouldn’t want one area of strategic excellence, such as aquaculture, to undermine another, such as tourism. Sensible regulatory heads are required. Moreover, having a large natural endowment does not guarantee success for a nation. Indeed, it has historically tended to invite corruption and foreign exploitation. You need the legal and economic framework, attitudes and institutions to unlock them sensibly. Witness Congo and Switzerland. The latter has a lower natural resource endowment, but is far richer.
The rebalancing of the New Zealand economy away from a spend-centric model to a more balanced growth model means we will need to sensibly use our renewable endowments. It is critical we embrace the opportunities offered, because the more you pull an income-generating lever, the less the incentive for austerity to repay the cost of years spent living beyond our means.
