The Tom Oakura Column - Taking a positive view
It doesn’t seem like a day goes by when there isn’t a discussion about what’s happening in the economy – locally or globally.
There is a lot of volatility in financial markets around the world and there’s no doubt the recent drop in international dairy prices will hurt our regions farmers’ incomes and that in turn will have an effect on other businesses around Taranaki.
But if we take a step back, it’s important to keep a few things in mind.
The first is that – as with all New Zealand’s main exports – dairy prices are cyclical. They go up and they go down. Dairy prices will recover over time and the longer-term outlook for the industry is strong.
It’s also important we don’t talk our economy down, and keep things in perspective.
We have an economy that is far more productive, more efficient, and more globally connected than ever before. We have been out-performing the OECD in recent years and a period of more moderate growth is only to be expected as our economy adjusts to the dairy industry’s income shock.
As Asian countries continue to grow and get wealthier they will want more high-quality, safe, and nutritious foods – like our dairy products.
The Government is helping to prepare New Zealand to take advantage of these opportunities, for example through negotiating much better access to markets in Asia and the Pacific through the TPP trade agreement.
Also, while dairy is down at the moment, prices for other exports are up. Beef prices for New Zealand farmers, for example, have risen to record highs.
Horticulture has had a very good year with total earnings topping $7.5 billion for the first time. Kiwifruit in particular has bounced back strongly from PSA, now with over $1 billion in exports.
Tourism is going great guns. Record numbers of tourists are coming to New Zealand, they’re staying for longer, and spending more than ever before. Visitor spending reached over $8 billion over the last year, which is up more than 20 per cent on the previous year.
Here in Taranaki, we’re having a renewed focus on tourism with some exciting opportunities being developed that will make our region one of the more exciting places to visit in New Zealand.
So while dairy is a vitally important industry for Taranaki and New Zealand, we will get through the trough and there are still many more strings in the country’s bow.
New Zealand has a flexible, responsive economy. This has allowed the Kiwi dollar to fall around 25 per cent against the US, compared to a year ago. This drop in the exchange rate helps offset the fall in dairy prices, and means all exporters get better returns for the goods and services they sell overseas.
Interest rate cuts will also be a shot in the arm for the economy.
Economists are still forecasting growth of around 2 to 2.5 per cent a year, which is good, solid, and sustainable. This growth will build on the good economic performance New Zealand has experienced over the past few years.
Hundreds of thousands of new jobs have been created. Wages have been rising faster than inflation. Households are saving a bit more and paying down debt, which gives them a greater sense of security.
And New Zealanders are staying home or returning in significant numbers because opportunities are better here than elsewhere.
So we can be optimistic and confident about New Zealand’s future.