Risky business
OPINION: In the same way that even a stopped clock is right twice a day, economists sometimes get it right.
"Absolutely breathtaking" is how well known economist Cameron Bagrie describes the current rural inflation rate of around 15%.
Bagrie says this compares with general inflation of just over 7% and business inflation sitting at around 10%. He says the tell-tale indicator of what’s happening to the country is the tax take.
Bagrie points out that in the last three months the tax numbers have “massively undershot” government expectations, which is borne out on payments of provisional and terminal tax. He says this is showing a flaw in the ideology that you can pump more costs onto the rural sector and there will be no collateral damage.
“But there is collateral damage and the real story here is about costs,” Bagrie explains. “What we are seeing now is that ideologies are being checked by economic reality. The economic reality is a big wake-up call for the Government because if firms are not making money, they don’t pay tax and the Government doesn’t have enough money to redistribute.”
Bagrie says it’s still early days and questions remain about what those numbers will look like in the future. He says, in the case of the primary sector, there is a need for a strong sales side and at the moment commodity prices are still volatile.
He says of all the sectors, the dairy industry to some degree has put itself in a more resilient position to counter this. Bagrie believes this is because over the past five years, farmers have made a point of paying down a lot of debt.
He says the sector is still facing the double whammy of high inflation and higher costs, which are affecting their bottom lines. He adds that the sector has been helped a bit by the NZ dollar, but the banks have pulled back on their expectations of what the dairy payout may be.
Bagrie says the dairy industry, like all businesses in NZ, will have to ruthlessly look at their bottom lines, cutting costs and recalibrating their operations.
He says this will be hard, given some of the environmental challenges that farmers have got coming – along with the ideological-driven policy agenda that’s been coming out of Wellington.
“The reality is that farmers won’t be paying as much tax and that will affect the economy.”
Newly elected Federated Farmers meat and wool group chair Richard Dawkins says he will continue the great work done his predecessor Toby Williams.
Hosted by ginger dynamo Te Radar, the Fieldays Innovation Award Winners Event put the spotlight on the agricultural industry's most promising ideas.
According to DairyNZ's latest Econ Tracker update, there has been a rise in the forecast breakeven milk price for the 2025/26 season.
Despite the rain and a liberal coating of mud, engines roared, and the 50th Fieldays Tractor Pull Competition drew crowds of spectators across the four days of the annual event.
Nationwide rural wellbeing programme, Farmstrong recently celebrated its tenth birthday at Fieldays with an event attended by ambassador Sam Whitelock, Farmers Mutual Group (FMG), Farmstrong partners, and government Ministers.
Six industry organisations, including DairyNZ and the Dairy Companies Association (DCANZ) have signed an agreement with the Ministry for Primary Industries (MPI) to prepare the country for a potential foot and mouth outbreak.
OPINION: ACT MP Mark Cameron isn’t everyone’s cup of tea, but he certainly calls it how he sees it, holding…
OPINION: Did former PM Jacinda Ardern get fawning reviews for her book?