Regulation strangling agribusiness

Rather, it is the hasty implementation of ill-conceived rules that are strangling the industry, are burdensome red tape intertwines with unforeseen repercussions.

Uncertainty stalks the agricultural sector - and that slows investment decisions, particularly in an election year. You see things like the proposal for the trust tax rate shooting up to 39% and it comes out of the blue, with no discussion, no preamble. The smart money won't touch that until after the election as it is probably not a well thought out policy, but something on the spur of the moment.

Then there's the carbon price, which didn't clear the recent auction, leaving the Government short of half a billion dollars. This signifies a lack of confidence and investors are apprehensive that the Government might abandon its ambitious environmental objectives. Meanwhile, the Primary Sector Climate Action Partnership, known as He Waka Eke Noa, is in a precarious state due to ongoing political indecision. The plan's future ranges from being on life support to completely abandoned, leaving it in limbo.

Then there is the increased regulations on banks; regulations don't come cheap for those who must comply. When those regulatins are on the cards but not yet in law, it creates uncertainty. Uncertainty holds everything up and it hangs on how the election falls.

There are unexpected consequences: While these new regulations may have been designed to make banks fairer and more accountable, while protecting their balance sheets, they will actually have a perverse, opposite effect.

You don't get more competition. It becomes harder for agribusiness to get finance as it is more complex to give it to farmers - so the banks focus on home loans as it is easier. Extra regulations increase the barrier to entry, protecting existing operators - so you get a poorer outcome for consumers and the economy.

The Reserve Bank is a good example of over-regulation. I can confidently say none of our agribusiness clients are excited about their relationship with the bank.

Meanwhile, some regulation is arguably redundant. The dairy industry, for example, must comply with the demands of their big buyers. These have carbon emission plans which must be met by Fonterra when negotiating commercial terms. Those requirements are passed on to the farmer.

That's the way it should work, through the force of the market with willing participants - rather than someone from Wellington imposing a regulation on the farmer.

While uncertainty isn't the same thing as calamity, bankruptcy is not stalking the land just yet. There is a capital and confidene shortage leaving the sector gun shy and weary.

Regulations on the economy have a profound impact and influence on a nation's prosperity. If we look at Australia, it becomes apparent why they are able to offer higher salaries to their teachers and nurses compared to New Zealand - they simply have the means to do so.

Australia's ability to generate $140 billion in revenue from coal exports to India plays a significant role in their financial capacity. On the other hand, New Zealand imposes bans on coal, oil, and gas exports, resulting in lower earnings and subsequently limiting our budget for public services.

It's important to remember that there are no free lunches in economics.

The notion of increasing taxes is also convoluted, as it involves taxing a diminishing capital base. We must acknowledge the existence of economic trade-offs and understand that choices always come with consequences.

Hayden Dillon is Findex's managing partner.