Dairy Prices – Evening Report

Bryce Edwards’ Political Roundup: The M. Bovis debacle deserves more debate

Bryce Edwards — Fri, 01 Jun 2018 04:58:40 +0000

Bryce Edwards’ Political Roundup: The M. Bovis debacle deserves more debate

[caption id="attachment_13635" align="alignright" width="150"] Dr Bryce Edwards.[/caption] What has emerged from the debate over the Mycoplasma Bovis saga is that New Zealand appears to have been let down by authorities – especially politicians and senior government bureaucrats who have mismanaged the country’s biosecurity, leaving farming in turmoil, and the taxpayer picking up most of the tab for their negligence. Leading the charge against the Ministry of Primary Industries (MPI), Duncan Garner accuses the government department of being dysfunctional and ill-prepared for inevitable breaches of biosecurity like M. Bovis. He says former MPI minister Nathan Guy should resign, David Carter should apologise and, although current minister Damien O’Connor is doing OK, he “went missing for months” – see his column: Alert, alert, mad cows on loose, MPI in deep coma. Garner says that MPI and the previous government should have been ready for such a breach: “Surely we had a plan for this chaos, should it arrive? This disease was here in 2015. So what did the National Government do? It did as little as possible. Nothing but damn negligence and utter inaction, from what I can see. Nothing in the face of a major threat to our wealth creators, our farmers who feed the world and seriously help us pay our way… It’s not as though National Party ministers and MPI hadn’t been warned, in a 2015 rebuke of MPI by the auditor-general: MPI staff were generally poorly trained and had the wrong tools.” Biosecurity New Zealand’s Roger Smith hit back, labelling Garner’s column “shallow and incorrect analysis” – see: MPI response system robust, says biosecurity head. Smith says “I would like to reassure all New Zealanders that MPI has a very good model for managing biosecurity responses which allows us to respond swiftly and consistently to incursions.” But he adds: “We also know our response to date has, at times, not been perfect and it has been harder on individuals than it should have been.” Writing on this “Garner-Smith bunfight”, Newsroom’s David Williams defends Garner, and says Garner “is well-connected and obviously worked his sources before putting fingers to keyboard. He pitched his criticism, rightly, at the top, at senior management and at the ministers who’ve overseen this mess. Because it is a mess. In my opinion, Smith talked when he should have been listening” – see: MPI must rebuild trust. Williams also provides details of others criticising MPI, including farmers who have been affected. For example, he says “Northland’s branch [of Federated Farmers] is calling for a full, independent inquiry about MPI’s approach to biosecurity.” He paints a picture of an agency that is too slow, too lax, and untrusted by farmers. Williams, who is based in the South Island, says “A few people tell me the way MPI has handled this outbreak means, they think, some farmers won’t be inclined to report problems in the future. They don’t think MPI has their back.” MPI’s big problem, Williams says in another article – Zero tolerance bites for cattle farmers – is that the agency needs to rebuild trust with farmers at the same time that it has to crack down on their non-compliance with many rules. The biggest non-compliance problem – which has been highlighted by the M. Bovis disaster – is the industry’s National Animal Identification and Tracing System (NAIT), which is meant to control stock movements and allow authorities to better deal with biosecurity outbreaks. It hasn’t worked, Williams says: “Five years of voluntary NAIT compliance hasn’t worked, with adherence as low as 30 percent in some areas. Stuff reported in December that only one $150 fine had been issued since 2012 for failing to declare the movement of an animal.” Williams reports that “MPI is expected to consult on recommended changes to the NAIT system in the next few months.” The new government are quite rightly pointing to the fact that the animal tracking system, NAIT, was developed and overseen by the previous National government. A very good RNZ article explains the origins of the system, and quotes new agriculture minister Damien O’Connor as being highly critical – see: How did NZ end up facing a 150,000-cow, $886m cull, and who is to blame? Reporting on the development of M. Bovis debacle, this article says “O’Connor again criticised NAIT for the spread of the disease, and was joined by Jacinda Ardern, who said her government had inherited a ‘shamefully underfunded’ system that was an ‘abysmal failure’. The government said farmers who did not abide by the system could face penalties.” That compliance with the animal tracking system rules hasn’t been enforced by MPI, amounts to a “system of light handed (to non-existent) regulation for farmers” according to Gordon Campbell, who complains that “taxpayers are now being expected to pick up the tab for some of the consequences of the latitude that has been extended to farmers” – see: On showing maximum love to farmers over M Bovis. It certainly raises the question of why the taxpayer should be funding a problem in the private sector. And a Newshub-Reid Research survey shows that New Zealanders are evenly divided on this issue of “whether it’s right for the taxpayer to stump up the cost of eradicating the disease” – see Tova O’Brien’s Should taxpayers fund the M bovis clean up? The results say: “Forty-four percent say it’s fair, 44.5 percent say it’s not fair and 12 percent don’t know.” Agriculture and biosecurity expert, Keith Woodford, says it is “legitimate” to question why the public is having to pay for this farming problem. He’s quoted by Andrea Fox in her article, Business case for cattle disease plan kept secret from public. This article also questions why MPI is keeping secret the background information on the decision to eradicate M. Bovis. Economist Michael Reddell also questions why the public has to pay “when all the benefits will accrue to industry themselves. It has the feel of the classic line about people being keen, when they can, to socialise losses and capitalise gains” – see: Why are we gifting so much to farmers? According to Reddell, there’s more than a hint of electoral strategy involved: “Perhaps the government is dead keen not to alienate further the business community and ‘regional New Zealand’, but this appears to be almost wholly an industry issue, and I’m not sure that mending party political fences with elements of the business community is really a legitimate use of public money. Perhaps there is a stronger wider public policy case to be made for this intervention? But if so, it hasn’t been made to the public so far. Instead, they are just taking our money and giving it to the farmers, to directly benefit the bottom lines of firms in that industry.” Keith Woodford has provided further explanation of the government decision in his article, Mycoplasma bovis: What does ‘phased eradication’ mean? But he adds that MPI “have not covered themselves in glory. All members of their response team will have been working hard within imposed limits, but the MPI system has let them down with too many layers of management and an inability to make timely operational decisions for each farm.” Ultimately, there will need to be a change to biosecurity laws, which have been shown by this debacle to be out of date. Prime Minister Jacinda Ardern explains: “We just need to make sure it is fit for purpose and every time I have a conversation I hear something else that makes me think was the Act agile enough for us to be able to deal with this infection as quickly and effectively as we could?” – see Andrea Vance’s Biosecurity legislation to be overhauled following M Bovis outbreak. Finally, Rachel Stewart has a long-running beef with MPI, and her recent column on the debacle is worth reading – see: Ministry’s cunning plan fails to stop M. bovis cattle disease. For a different take on the biggest victims, at the centre of the disaster, read her latest column: Why I love cows and you should too.]]>

Tony Alexander’s Weekly New Zealand Economic Overview 19 April 2018

Selwyn Manning — Fri, 20 Apr 2018 01:12:41 +0000

Economic Analysis by Tony Alexander. This week I take a simple look at reasons why our economy’s growth rate and jobs growth have both been so strong the past four years, in spite of the big fall in dairy prices over 2013-14. Strong Growth For Four Years In the absence of any truly useful economic data releases this week I thought it might be useful to take a look at the past four or so years. In calendar year 2017 our economy was 14.7% bigger than in 2013. That means growth has averaged near 3.7% per annum. That is a strong performance from three points of view. First, it is well above average annual growth for the past 20 years of 2.8% per annum. Second it is well above rates of growth over recent years in countries against which we have traditionally compared ourselves such as Australia, the UK, USA, Japan, the EU and so on. Third, it is a much stronger performance than any of us were expecting to follow the 60% fall in international dairy prices between 2014 and 2015. And it is not just in the GDP figures that we see a strong period of growth. Job numbers have grown near 15% or 350,000, the government’s accounts have moved from deficit to surplus (how long before our new Finance Minister blows them away however?), and the current account deficit has shrunk. The decline in dairy sector income was very easily offset by a number of factors. One was a sharp recovery in the construction sector. The number of consents issued for the construction of new dwellings hit the lowest level since the 1960s (when the population was below 3 million) come 2011. That total of 13,500 is now dwarfed by consents in the year to February of just over 32,000. The volume of non-residential construction in 2017 was ahead almost 30% from 2013 levels. Plus, infrastructure spending has picked up. Employment in construction at the end of 2017 was ahead 42% from the end of 2013. (Manufacturing was unchanged, a result consistent with it’s long-term flat to downward trend..) Our economy has also received a strong boost from a surge in visitors coming to our shores. In the past five years visitor numbers have risen by 46%. In the previous five years ending in February 2013 they grew by only 4%. This boom has created plenty of extra jobs and created significant capacity issues in the accommodation sector in particular. And now that Immigration NZ are cracking down on migrants in the hospitality and retailing sectors employers are really struggling to find staff. Be mindful of these staffing issues the next time your stay at a hotel is not quite up to expectations. And be sure to book ahead else you could find yourself being billeted with company staff in the location you are visiting and imagine the mess that could create in this day and age. Our economic growth rate has also of course been pushed higher by a huge migration surge. Our population has grown about 8% over the past four years assisted by a net immigration inflow of about 263,000 since early-2014. There has also been assistance to growth from the large fall in oil prices from 2014 levels, and the Reserve Bank cutting it’s official cash rate 1.75% over 2015-16 after raising it 1% over 2014 then watching as inflation came in near 2% lower than they were expecting. Opps. That opps is important. Having twice raised interest rates post-GFC and had to quickly slash them the Reserve Bank will want to poke the whites of the eyes of threatening inflation before it will raise rates a third time. So is this strong pace of economic growth continuing? Over the December quarter GDP (gross domestic product) rose by 0.6% after rising 0.6% in the September quarter. So in the second half of last year growth was running at about a 2.5% annual pace. Growth has slowed down. Why? Weakness in agriculture and food processing by the looks of it which we can generally put down to the unpredictable impact of weather and such weakness is unlikely to persist. But we’ve also seen a surge in imports probably driven by strong growth in personal consumption and increased business investment. Imports count as a negative in the GDP accounts but to the extent that the goods coming in will go toward building the country’s economic base this will be good for future growth. In fact as we look ahead we see scope for some good growth in business investment because a key constraint now on the ability of businesses to grow is a shortage of labour – as we discussed last week. With labour unavailable businesses need to boost capital spending to raise capacity and boost productivity. But perhaps next week or the week after we will take a proper look at factors underpinning our expectation for continued good growth in the economy. Suffice to say, unless we get some major offshore disturbance, prospects for growth look strong. If I Were A Borrower What Would I Do? Competition between banks in the one and two year fixed terms remains intense. I would look to have a decent chunk of my mortgage at those terms and a tad fixed three years. Longer than that is too expensive for my taste and the fall in the annual inflation rate from 1.6% to 1.1%, and the core rate excluding energy and food to 0.9% from 1.1%, suggests our central bank remains a long, long way off raising the official cash rate.

The Weekly Overview is written by Tony Alexander, Chief Economist at the Bank of New Zealand. The views expressed are my own and do not purport to represent the views of the BNZ. This edition has been solely moderated by Tony Alexander. To receive the Weekly Overview each Thursday night please sign up at www.tonyalexander.co.nz

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