Wednesday, 16 August 2023 12:55

Costs, tax and inflation all impacting

Written by  Peter Burke
Economist Cameron Bagrie says the current rural inflation rate of around 15% is ‘absolutely breathtaking’. Economist Cameron Bagrie says the current rural inflation rate of around 15% is ‘absolutely breathtaking’.

"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.”

More like this

Keynote speakers lined up

SIDE 2024 organisers have secured some key speakers for the event. Here are four of the keynote speakers:

Keeping it simple on farm costs

After 30 years’ dairying on the same Bay of Plenty farm, Donna and Corrie Smit have learnt lessons on weathering everything from devastating floods to milk price fluctuations.

Farming costs rising

While the forecast for global sheepmeat and beef demand is generally positive, an increase in farm expenditure and inflation could significantly reduce farmers’ margins.

Lower farm costs - Cameron

ACT primary industries spokesperson and Whangarei dairy farmer Mark Cameron says one solution to rising prices in the supermarket is to reduce the rising production costs on farm.

Featured

New ag degrees at Massey

Changing skill demands and new job opportunities in the primary sector have prompted Massey University to create a new degree course and add a significant major into another in 2025.

The show is on!

It was bringing in a new Canterbury A&P Association (CAPA) show board, more in tune with the CAPA general committee, that has ensured that Christchurch will have a show this year, says CAPA general committee president Bryce Murray.

Forestry cuts into stock numbers

There is an urgent need for the Government to put a limit on the sale of farms for forestry - particularly for carbon farming.

National

Food charity to hold online auction

Meat the Need, New Zealand’s dedicated charity delivering locally sourced protein meals to food-insecure communities, is launching an online National…

Machinery & Products

Landpower increases its offering

Landpower and the Claas Harvest Centre network will launch the Claas Scorpion and Torion material handling solutions to the market…

New F5 balers from McHale

Irish grassland machinery manufacturer McHale has unveiled the new four-model range of F5 fixed chamber balers.

» Latest Print Issues Online

The Hound

Leaky waka

OPINION: Was the ASB Economic Weekly throwing shade on Reserve Bank governor Adrian Orr when reporting on his speech in…

Know-it-alls

OPINION: A reader recently had a shot at the various armchair critics that she judged to be more than a…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter