Yes we can catch Australia

28 February 2010

Yes we can catch Australia

Speech by Don Nicolson, President of Federated Farmers, to the 2010 ACT Conference in Wellington on 27 February 2010

I would like to thank your ACT Party President, Michael Crozier, Vice President, Chris Simmons, your party leader, the Hon Rodney Hide MP and members of the party caucus for this opportunity.

For those who don’t know this, you are not the first political party conference Federated Farmers has spoken at in recent times.  My Federated Farmers Dairy chair, Lachlan McKenzie, having addressed the New Zealand Labour Party last year.

Speaking to the Labour Party and you here today affirms that Federated Farmers is an apolitical body.  Our members are drawn from a wide political spectrum but as a union of farmers, we act in the best interests of farmers and farmers. 

We don’t care who does it, as long as someone does what we ask!  At least, that’s the idea.

While we’re probably not on Michael Laws Christmas card list, we believe the interests of farming serves the future of New Zealand.

That’s why, following on from Dr Don Brash, we believe we can not just catch ustralia but actually, surpass it.

Yes Australia is beloved of God.

It’s sprinkled with minerals just below the desert surface that comprises the most arid continent on earth. 

But unlike Reserve Bank Governor, Dr Alan Bollard, Federated Farmers doesn’t see Australia as some latter-day El Dorado. To envisage Australia’s future go to mining ravaged Nauru.  It may take centuries but El Dorado, Australia is not.

The means to truly grow the economy of Godzone is physically right here but do we have the mental and political will to grab it? 

That’s the question I pose. 

Frankly, the signs have not been encouraging so if you will permit me a small detour, growth depends on government getting its own house in order.  That cannot start until New Zealanders are given a say on the electoral system.

MMP only arose out of a sense of betrayal, first from Labour then core National Party supporters.  The electorate responded by putting our politicians in handcuffs.

While First Past the Post may have been a tyranny of the majority, we’ve swapped that for a tail that now wags the dog.

Since 1996, New Zealand has been on an extended tea-break as MMP encourages government, any government, to focus on keeping 50.1 percent of the electorate, ‘sweet’. 

Forget step change, think baby steps.  But the more we tread water the more we go backwards. I think the term is entropy.

But to catch Australia, we need bold change and courageous political leadership, all built on a premise that governments can actually generate its own popularity.  What we have instead is policy by continual polling based on where public opinion has been, not where we are going.

That’s looking backwards and not forwards. In my mind, constitutional reform is also essential. 

I’m not talking about ditching our head of state either.  That’s one of the very few areas of government that has not exploded in cost but which seems to work.

No, what I am talking about is a written constitution that brings clarity to the interrelationship between the Executive, our single chamber Parliament, the judiciary as well as our rights, freedoms and obligations as citizens.

To farmers, property law is a very hot subject.  One only has to look at the passion around transmission lines.  It’s no wonder too given upwards of 40 percent of all transmission assets fall on land where no compensation and recognition of a property right exists.

Indeed, we see our rights being eroded in the name of conservation or biodiversity.  Councils can literally designate the land from underneath your feet for nothing in return.

Rights in property is a basic tenant of a market economy but since 1996, that right has been eroded almost as fast as Government has grown.

In the six years between 2002 and 2008, Labour’s second and third terms, the size of Government grew by a staggering 63 percent.  63 percent.  From $47 billion in 2002 to just under $76 billion in 2008.  Today the figure is much higher.

I don’t say this to denigrate Labour. 

That party reflected a crude political metric that to stay in power these days, you need to keep most of the people, mostly happy, most of the time.  It’s a trend we see right now with the National-led Government you are part of. 

But the trend line is unsustainable as government now represents about half of New Zealand’s total economic activity.  Have we had explosive economic growth?  Is New Zealand zooming up the OECD ladder at break-neck pace?

It’s why we applaud ACT pushing forward its Regulatory Responsibility Bill and in the absence of a written constitution, I believe, it ought to be entrenched.  This is beyond politics and I urge the other parties to drop any jaundiced view of it.  Move beyond politics.  This is about doing the right thing.  The right thing.

Only through legislation like this will Government be paired back into shape. We farmers know what it’s like to operate on a budget and while challenging, it also drives innovation.  Yet government increasingly has an infinite expectation on what is a finite pile of cash.

Government is complicit in building these dependencies borne out of perceived political necessity.

This power to take, undermines the entrepreneurial number eight wire mentality that bred Joseph Nathan, Lord Rutherford, Richard Pearse or Colin Murdoch.  These are four great Kiwis who share a farming heritage and who share another trait, they left a lasting legacy in commerce, science and industry.
If the current approach of government was around in their day, I ask you, would it have aided or hindered them?  Ponder that.

But to grow the New Zealand economy by 2025 demands our winners be fully backed. 

While we farmers applaud Weta and hail Sir Peter Jackson as a truly great Kiwi, what they do is only made possible by having a solid economic foundation.  They’re the icing on the cake but that cake, If we have the will, is the biological economy backed by sensible minerals exploitation.

If New Zealand is the tortoise to Australia’s hare, we’ve got something Australia lacks.  Lots of water.

Water is a necessity of life and dovetails with the traditional strength of New Zealand, which is primary food and fibre production. Whether its mohair fibre to stunning Central Otago pinot noir, we need security of water to grow and go forward economically.  The potential is immense. 

If we take just Canterbury, there is enough water storage potential there to irrigate a land area larger than Samoa.  That, by the way, will take just 12 percent of the water in Canterbury that currently runs out to sea.  This is water that falls from the heavens onto our land and not across the Tasman.

The award winning Opuha Dam proves that water storage works commercially with an economic payback of 8:1.  More water, more productive land, more exports.  It’s a simple equation that demands a mind shift in Government from passive to active. 

Why, I ask, does the Government see the building of roads through a Crown entity as a core function but the building of water storage is not?  We need an agency for agricultural infrastructure like what the Land Transport Agency does for transport infrastructure; water is at the top of a list, which also includes broadband.

Water storage is about future proofing the economy and making the most of what ought to be, our most productive seasons. 

One prominent commentator claimed last year that New Zealand had effectively run out of productive land. We haven’t as the Mackenzie Basin applications now show.  That’s why it’s a real test of economic development and this government’s resolve to grow this economy.  It’s about more productive land.  More so, as the global population will grow by billions over the next four decades alone.  They will need what we can produce – food.

We are in the right part of the world at the right point in history if we can grab the opportunity.  So while Australia digs itself up, we can literally green ours. 

Yet I can almost hear the greens belting at their keyboards about agriculture’s environmental impacts.  Frankly what comes off our farms pales to the environmental impact of New Zealand’s third most numerous large mammal – that’s you and I.  Cows and sheep don’t use detergents, they don’t drive cars, they don’t shop at The Warehouse and they don’t need landfill either.  We humans, individually, will also generate some 99,000 litres of wastewater in a single year and there are 4.3 million of us.

So while water is one side of the primary coin, pasture renewal is the other.  Modelling by BERL for the Pasture Renewal Charitable Trust, indicates that regular refurbishment of farm pasture has potential to our direct contribution to GDP by $800 million and total GDP by a jaw dropping $2.2 billion. 

What I am saying is that water storage, policy reform and work inside the farm gate by farmers, could expand pastoral agriculture’s contribution to the economy by upwards of a third – that’s well over $5 billion more each and every year.

If we can get a global movement away from wearing plastic, putting plastic on our floors or putting plastic in our houses as insulation, wool could well comeback from the brink.  It’s a market conundrum that the most ecologically friendly of fibres is performing the worst in this age of green consciousness. 

Perhaps that shows we are not as green as we are led to believe.  

The insulation subsidy, there’s a word isn’t, subsidy, has been great for Fletcher Building but a damp squib to the manufacturers of wool insulation, let alone me as a sheep farmer.  Any country with silica can make a pink batts type product, but only New Zealand can generate such an ecological and renewable product, which Kiwi wool is.  We are unique so what comes off our sheep is also unique. 

Here’s the undiscovered country. Wool in dollar terms, to have parity with 1980 returns, ought to be a $2.8 billion export.  Yet today it’s a shadow of that at just under $600 million.  We don’t need a handout but we do need to get control of distribution as the last time I checked, the price of carpet hasn’t fallen by over 80 percent.  Wool is in farmers hands to fix but fix it we must.  
Yet it’s not all about the land but our waters too. 

20 percent of the diet for 2.6 billion people is fish.  Yet going out to sea with nets cannot cope with the demands a growing world population will place upon wild capture.  According to Ernst & Young, aquaculture could be worth up to $2.2 billion to the New Zealand economy. 

That could be conservative.

Norway exports $4.5 billion worth of salmon and trout each year and effectively controls production out of Scotland and Chile.  Aquaculture is to Chile what sheep are to New Zealand – nigh on a $3 billion dollar industry – or ten Avatars each and every year.  What aquaculture needs are direct policy support and research and development. 

Indeed, what farmers of all types need, is a bipartisan commitment to research and development to achieve a sustained spend of three percent of GDP by 2029.

Yet in aquaculture trout presents itself as another economic test.  Here’s a fish that isn’t native and is farmed everywhere except here.  Moreover it can be farmed in saltwater or fresh yet removing it from the Conservation Act is akin to changing the name of New Zealand. 

Protecting the interests of Fish & Game is denying New Zealand an industry that could be worth $US50 million in five years and much more after that.  That’s only the tip of an iceberg when you factor in several freshwater crayfish farms, the farming of eel, whitebait and our other fish species.  It’s time for the Government to send some pro-business signals and when you have Sanford, who would start farming trout tomorrow, it’s bizarre we are not making the most of our natural and introduced species.

Yet catching the lucky country means rapidly unleashing our considerable minerals wealth. 

On land, our mineral reserves are estimated at $140 billion – if we have the political will to extract it.  In Southland, for instance, there is a 650-year supply of lignite that has the potential of turning New Zealand from a urea importer into an exporter – generating the equivalent of $1.5 billion in export equivalent income each year. 

Yet few are aware of just how vast New Zealand really is.  We ‘own’ 5.7 million square kms of seafloor - equivalent to two-thirds the size of Australia.  The estimated mineral wealth in just 4 million square kms of that area has been estimated by Canterbury University at half a trillion dollars. 

The technologies for deep sea mining, embryonic as they are, exist.  New Zealand ought to be at the vanguard of developing this technology because what’s on the land will most likely be on the seafloor too.

Yet I wonder what would happen if instead of Kuwait we came across billions of dollars worth of uranium ore instead.  Would New Zealand ignore it?  Pretend its not there on the basis we are ‘clean and green?’  Or would pragmatism prevail?

At this juncture we need to see the signals that will enable us to take advantage of our natural assets.  Signals could be as diverse as domesticating and farming Weka, farming Rainbow Trout and tapping into our considerable minerals wealth. What we need is for the Government to stand up and show us that they are for exporters.  That starts by removing the barriers to trade while allowing us to retain more of our hard earned money.

As farmers, we collectively retained just 6.2 cents inside the farm gate out of every dollar we generated for New Zealand Inc.  Given that includes dairy, we arable and sheep and beef farmers, will be staring at some pretty red ink.  Given New Zealand Inc takes much of the other 93.8 cents for, well, stuff, you can understand why we want to see real change and a real direction.  Sadly, our electoral system cannot deliver that and that means it has to change.

So Australia only became the lucky country off the back of China’s appetite for minerals.  It needs them.  Australia has them.  But Australia has ridden the commodities boom led by coal – its largest but most unsexy export. Yet New Zealand has three things that give us a unique competitive advantage over the so-called ‘lucky country’ – water, grass and dirt. 

It’s over to you politicians to give us the tools and means to harvest them responsibly and ethically. 

 ends

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