Export Dip A Big Loud Economic Klaxon

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4 September 2012

Export Dip A Big Loud Economic Klaxon

The 0.4 percent fall in merchandise export volumes for the June 2012 quarter, has Federated Farmers questioning if government, at all levels, understands the need for spending and policy restraint.

“This slight dip in export performance could cut deep into the economy, if spending and policy aspirations are not pared-back,” says Bruce Wills, Federated Farmers President.

“There is a mass of policy expectations on agriculture designed to make us achieve things for which there is no easy solution. Actually, for some issues, there are no current solutions at all.

“There seems to be little recognition that in order for councils or Parliament to spend, someone first needs to go out and sell something. It is why the public deserve to know how they will be individually affected by policy wish lists.

“Even if our Official Cash Rate was zero, I doubt bank interest rates would be much different than today’s.

“The exchange rate is frankly too high, but tinkering with the monetary policy framework will get us nowhere, especially in the current global environment. The one thing that might make a difference, but no one seems willing to discuss, is the level and quality of government spending by central and local government.

“Instead of closely watching the cost of their policy ideas, our politicians want to fritter it away on nice-to-haves. If this tempo of borrow and spend continues and is combined with business unfriendly policies, then it will make it very hard to farm or to export.

“It is why Federated Farmers is bitterly disappointed the Spending Cap Bill is on hold. It represented an invaluable tool to bring government spending back to a modicum of reality.

“I have visited countries that have run out of cash and I can tell you the choices then become brutal ones.

“Similarly, watering down the Regulatory Standards Bill, as mooted by the National-ACT Confidence and Supply Agreement, will make the Bill virtually toothless. It will not provide any real check on the proclivity of our politicians to over-regulate first, before seldom asking questions second.

“And this is before we mention Opposition parties’ costly spending promises and their intended changes to the ETS, resource rentals, taxation and employment law.

“We have a great export sector that gives New Zealand spending choices, yet I fear it is one that risks being crippled by policies that will harm its productivity and competitiveness. If we don’t wish to see our export performance decline then something must be done,” Mr Wills concluded.

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