New Zealand needs to return to a free-market economy operating in an environment where businesses are enabled but not subsidised or unduly restrained by government, Federated Farmers general policy manager Nick Clark says.
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Federated Farmers has been considering what an economic recovery might look like and what needs to happen to help rather than hinder it.

At a macro level Feds supports the Government’s short-term crisis measures such as the wage subsidy but a quick-as-possible return to normality is needed, he says.

“We need a return to fiscal responsibility with operating spending brought under control, surpluses restored and debt being repaid.

“This will take time but should be done wherever possible without the imposition of new or increased taxes.”

From a Feds perspective recovery measures must include helping the primary sector remain a key export and economic driver because, with the hard times for international tourism and other services exports such as international education, the primary sector will have to do even more of the heavy lifting.

Feds strongly supports commitments to boost infrastructure investment.

“There’s plenty that can be done to invest in rural infrastructure, which will help stimulate the economy and improve resilience of rural communities.”

It includes roads, telecommunications and greater and more effective use of seasonally variable water resources to generate electricity, irrigate farms and orchards and provide more reliable sources of drinking water for rural communities and for livestock.

“We’re very keen on measures to improve skills in the workforce and enable people who have been made unemployed to be redeployed where the jobs are and will be.

“It’s great to see the big increase in New Zealanders working in horticulture currently and looking ahead we have a great opportunity to get people employed to deal to weeds and pests, including wilding conifers and the possums, stoats and rats wreaking havoc on native bird populations.”

Though the economic fallout from covid-19 is unprecedented, fiscal responsibility isn’t an impossible dream.

In 2010-11 NZ’s fiscal deficit blew out to a whopping $18.4 billion following the double whammy of the global financial crisis and Canterbury earthquakes.

That the government of the day managed to return to surplus four years later in 2014-15 without tax increases shows what is possible,” Clark said.

“We also want a new approach to the environment with regulatory proposals such as Essential Freshwater revisited in the new reality.

“There are existing regulations in place in relation to these concerns and instead of adding further regulation the focus should be on investment in projects that will bring lasting environmental benefits.”

They include funding to improve urban and commercial sewage discharges, rural and urban water supplies and stock drinking water in rural areas.

That would improve environmental outcomes while providing stimulus to the economy.

Funding for native plantings and biodiversity work like planting, pest control and fencing will also be needed.

Financial and other support for farmer catchment groups is another action that will result in immediate environmental benefits.

Better state-of-the-environment monitoring and reporting is another need.

“This doesn’t mean the primary industries are doing nothing. We’re already committed to a path of ongoing environmental improvements.

“It means ensuring what we do commit to is effective and will efficiently deliver the environmental outcomes we’re seeking.”

More generally, the Government needs to stop imposing more and more costs on businesses, especially small businesses, Clark said.

“It was very disappointing the Government went ahead with the huge increase to the minimum wage.

“Looking ahead it needs to ease off and give businesses breathing room and a bit of much-needed confidence.”

While Federated Farmers has positive ideas for the recovery there’s concern about a wave of protectionist sentiment, including enthusiasm for the Government to do more to promote onshore manufacturing.

“There’s logic in NZ having capacity to manufacture essential supplies in the fight against coronavirus or a future epidemic.

“It’s great local businesses have jumped at the opportunity, which shows their great flexibility and innovativeness in responding to demand.

“But some people want to go further, encouraging the Government to promote manufacturing on a larger, broader scale to drive us towards a new economy.

“For many years this idea has been on the fringe but the Government sees other countries flirting with similar ideas and it’s seriously considering promoting manufacturing as part of its thinking for longer-term recovery.”

While promoting manufacturing sounds seductive it’s unclear what it could mean, Clark said.

It could mean manufacturers getting preferential treatment from regulations, like overseas investment, it could mean using taxpayer money to subsidise new and existing manufacturers through tax breaks, grants or soft loans.

It could mean giving NZ manufacturers an advantage for government procurement and it could even mean going further to protecting them from cheaper and better imports using tariff and non-tariff barriers.

“It would be a very bad idea to subsidise domestic manufacturers to provide goods we currently easily and cost-effectively source from more efficient overseas producers or to erect trade barriers to impede those imports.

“It would reverse 35 years of policy where we let the market decide what’s produced here versus what’s produced overseas, something which has served farmers, businesses and consumers very well.

“Reversing course is not a good idea.”

Protecting industries from economic reality, including manufacturing and even farming, and borrowing heavily to pick so-called winners like the Think Big projects, were two of several reasons why NZ’s economic performance was so woeful that its economy came close to collapse in 1984.

“Another worry is that our trading partners will not look kindly upon us if we were to subsidise domestic manufacturers, erect tariff and non-tariff barriers against imports or impede the export of commodities like logs.

They could quite easily retaliate against our agricultural exports and impede further progress to reduce trade barriers.

“Neither would be in the interests of farmers or the economy,” Clark said.

Regional small, organic dairy farm industry had been rocked by Horizon Organic nonrenewal.

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