The real ‘lucky country’

Speech by Bruce Wills, President of Federated Farmers, to Federated Farmers National Council, Wellington

In recent days the International Herald Tribune has penned an expose supposedly blowing the lid on New Zealand’s ‘clean green 100% Pure' brand’.

I wish to recap what I told the journalist.

I said to him New Zealanders don’t do moderation very well. As a people, we tend to be most critical of ourselves. It means we often see ourselves as the very best at something, or the very worst.

International visitors I meet are confounded by the level of self-criticism they read or see.

We call it a ‘tall poppy’ syndrome, but when visitors look at our countryside and our waterways, they are struck by how pristine and clear they are.

I said to the journalist, can we do better? Yes of course we can. But, I strongly believe when you look at what we do and how we do it, we are way up there in terms of environmental performance.

I then ended by inviting him to come to New Zealand and see for himself. Nothing beats seeing with your own eyes.

He was of course writing a story about New Zealand from Hong Kong.

I must note the coverage of this far exceeds Dr Jeremy Hill becoming the first New Zealander to head the International Dairy Federation in 109 years or indeed the limited coverage of Tim Aitken and Lucy Robertshawe being named Marks & Spencer’s number one farm supplier on earth.

It is an unhealthy part of our psyche that we delight in the negative and ignore the genuinely positive.

So how do we grow in this self-imposed fishbowl?

New Zealand exports are more likely to grow if successive governments target a population of 15 million by 2060. It is that simple.

That is not my idea but highlights a fundamental discussion we are not having about how big we ought to be and by when. It comes in a recent thought-provoking paper prepared for Business New Zealand by the New Zealand Institute of Economic Research.

If we want to grow New Zealand into an agricultural superpower we need a larger domestic market to create and exploit the opportunities we create.

This report also recommends considering tax incentives or grants to encourage large, successful New Zealand companies to remain based here, instead of targeting all assistance to companies just starting out as exporters.

I am a little nervous about incentives because that is about picking winners.

Yet it does feel as if we are becoming a branch economy. Lion Nathan, which can draw on a lineage back to 1840 is now a Japanese company.

Fisher & Paykel that iconic staple of New Zealand kitchens is to be owned by the Chinese.

Interestingly enough, given the CraFarm saga occupied some of our time at June’s National Conference, Fisher & Paykel’s sale has passed without too much of a whimper. There was no ‘Save our Stoves’ campaign, no petitions, no marches and few editorials.

Fisher & Paykel joins NavMan and a host of successful starts that have left these shores. The biggest arguably being Joseph Nathan’s Glaxo - founded in the Manawatu.

So the NZIER is right to ask questions about how we maintain the economic benefit from New Zealand companies, either bought by foreign investors or moved closer to foreign markets.

Can I suggest the immediate answer lies with what we do.

I can confidently say, that in terms of value and in terms of productivity, New Zealand farming is the star turn. Globally New Zealand agriculture is Hollywood and Wellywood all rolled into one.

We are the hot house, the benchmark and the Wall Street of global farming. I must ask why that being the case, some Kiwis delight telling overseas conferences or media what we get wrong, whereas I like to focus on what we get right.

I believe we get more things right than we get wrong and farmers do deserve positive accolades for this.

One area we lose out is a lack of integration within our meat and wool sector. That, to me, is the hallmark of dairy industries success. If we take Fonterra, it is a global ingredients company rather than a processor of milk.

New Zealand’s core competitive advantage is food and instead of armchair experts thinking finished products, we need to be thinking ingredients. Meshing our ingredients within global supply chains so that it becomes “NZ Inside”.

McDonald’s NZ being a fine example of what I mean, given the value of primary exports it sends is only one third lower than the total export returns from the film and television industry.

ANZ’s latest Insight paper states “strong international demand combined with growing supply constraints are driving an enormous opportunity for agricultural trade.”

Between 2012 and 2050, ANZ expects New Zealand to capture an additional $500 billion to $1.3 trillion in agricultural exports. This is an immense opportunity and the banks are beefing up their agricultural skills as they know this is the once and future secret of New Zealand’s success.

So what is holding us back?

Capital constraint is a major one. Something more Kiwi savings would help with as that lessens our reliance on Belgian dentists and Japanese housewives.

We can also add a poor skills match between those leaving tertiary institutions with what employers actually need. While we have growing urban unemployment we cannot fill vacancies on-farm.

So we have people with the wrong skills in the wrong locations,

We also face land use conflicts.

We have reason to fear councils rushing blindly into setting limits based on flimsy analysis. I must make mention of Horizons One Plan and urge the Council to invite Landcare Research to present its findings.

Agriculture needs land and while it is a finite commodity, we are no where near maximising the full potential of New Zealand’s millions of hectares of pasture.

The only thing we have to fear is our own nagging self-doubt. The market determines best land-use because New Zealand was built by those who believe in the word, can.

We must guard against becoming the country that can’t.

Water is a flashpoint but it is an area where there is too often ignorance with even harsher words spoken about farming.

At least the positives of the Land & Water Forum are that it points towards a better future. We are on the same page and are engaged.

Yet if we have problems with the RMA in trying to generate wealth, while environmentalists complain about the RMA too, maybe we need to have a closer look. We need to ask if the RMA remains the best policy instrument for New Zealand in the 21st century.

The NZIER is in no doubt that it represents a blockage.

We must also question the pantheon of industry good bodies and organisations through to government programmes purporting to assist exporters.

There seems to be a lot of duplication when exporters face similar market and logistical challenges. We need to ask if we, on the industry side, ought to be mirroring the way the Ministry for Primary Industries has consolidated itself. This is flowing through into what the Industry Training Organisations are currently doing as well.

Maybe fewer but better equipped and resourced voices could be a good thing, taking a leaf from Business NZ to form a Primary New Zealand body.

The one thing we know is that the world is going to demand 60 percent more agricultural output than what globally was produced in 2007.

Are we the country of can? I believe we are.

Titled "Scale Up or Die", that recent NZIER report argues successful exporting nations are not only closer to their markets, but have large home markets as well. It is this that helps to create the scale needed for export success. So how do we shape up?

§ In 1900 New Zealand’s population was just under a million

§ In 1980 New Zealand’s population was just under 3.2 million

§ In 2012 we have just broken the 4.4 million mark.

By anyone’s book our growth has been rapid but not rapid enough. The NZIER argues for 15 million Kiwis by 2060.

The report's authors, economists John Stephenson and John Ballingal, argue:

"If New Zealand's biggest impediment to better economic performance is an absence of scale, there is only one way to overcome this over the long term and that is to grow the population through more migrants.”

What the NZIER suggests is the biggest human growth-phase we have ever seen. Statistics NZ projections, even at the most extreme end of migration, places New Zealand with around seven million souls by 2061.

So what the NZIER wants is double Statistics NZ most optimistic projections.

That of course poses a question of where they will live given the recent debate about affordable housing. Not to mention the land this will take.

We know from Landcare Research that we are eating our farmland up at a worrying rate. Current building techniques threaten to eat up the land that creates the basis for future economic prosperity.

If we are to increase our population it demands a move to high-rise, high density housing. It demands the use of brownfield land first and greenfield last; a hierarchy for land use.

Reading the NZIER report it is hard to disagree when the report’s authors suggest New Zealander’s have a low level of financial literacy. We bemoan foreign investment but queue for 30-months interest free terms funded by someone else’s savings.

Some farmers complain about losing on swaps while others have little issue with them.

I don’t believe swaps is the big issue facing farming that some may make it out to be. If we bail people out for poor choices, it just means those who made good choices pay more.

The big issue is our relationship with the environment.

If we overbalance on economic development, we destroy the environment and that costs us all.

Yet if we overbalance on the environment, we destroy the economy and that equally costs us.

Striking the right balance is important. With good management and good science we can do both, we can continue to improve how we interact with the environment, and we can grow the economy. We can grow more jobs with a lighter footprint.

The solution is not complicated.

It is to trust Kiwis to make their own spending decisions. Government just needs to spend less. It is about focussing on outcomes rather than process. It is about trusting the collective wisdom of a community rather than views of a distant judge.

We produce safe, quality food in a world that is crying out for more.

We have great water nestled among some of the best scenery on earth.

We are an educated and innovative people with an exciting future.

We are the ‘lucky’ country.

Thank you

ends

© Scoop Media