Massey University's GDP Live team with the ageing, shrinking, Japanese population, the bug with the billion dollar bite, flexible workspaces, coronavirus price gouging, the re-rise of Aussie houses and is the world now ready for plant-based meat?

Massey University's GDP Live team with the ageing, shrinking, Japanese population, the bug with the billion dollar bite, flexible workspaces, coronavirus price gouging, the re-rise of Aussie houses and is the world now ready for plant-based meat?

Today's Top 5 is a guest post from the team at Massey University's GDP Live.

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.

And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 5s here.

1. Japan’s population is rapidly ageing and shrinking.

Japan is being forced to consider wide-ranging structural reforms with current projections that by 2060 there will be one elderly person for each working-age person. The problems of an ageing population sound familiar by now: increasing income inequality, declining long-term growth, and concerns around the government’s ability to sustain the level of spending required.

According to IMF News:

“The aging and shrinking population will strain Japan’s public finances, as age-related spending—such as on healthcare and pensions—rises while the tax base shrinks. Demographic trends are closely tied to low interest rates. In an aging society like Japan’s, during the pre-retirement phase, individuals increase savings for retirement while investment remains restrained due to a weak outlook, leading to pressure for lower rates. Low interest rates depress the profitability of financial institutions, and incentivizes them to invest in riskier assets in a continuing search for higher returns.

Japan’s rapidly declining population has also led to empty homes due to oversupply, and an accompanying weakening of house prices, particularly in rural areas. Such an effect on the housing market raises risks for the financial health of Japanese households and banks. As a result, Japan’s financial sector vulnerabilities will grow as its demographic transition continues.”

The reforms being considered include incentives for regenerating rural areas and using automation and artificial intelligence technologies to offset a shrinking labour force. However, automation won’t eliminate the ballooning costs of supporting the elderly population and taxes will inevitably have to rise. Developed countries including New Zealand should take note.

2. A little bug with a billion-dollar bite.

A little bug has wiped out large parts of Italy’s horticulture output. New Zealand is a global player in the fruit industry with a horticulture industry worth over NZ$6 billion (including being the world’s largest kiwi fruit producer). If this bug makes it to New Zealand, the consequences could be devastating but if we manage to keep it out, then New Zealand fruit growers could be laughing all the way to the bank. Like it or not, this is modern market economics at its brutal best.

From RNZ:

“A plague causing Italian farmers to walk away from their land is a real risk for New Zealand, and MPI are asking New Zealanders to watch out for the stink bugs.

New Zealand is on red alert for an invasion of brown marmorated stink bugs - considered one of the country's greatest biosecurity risks - after farmers across Europe report record crop devastation.

Italy has been hit particularly hard during its summer season, with damage to fruit crops including apples, pears, kiwifruit, grapes and stone fruit of over NZ$674 million (€400 million), leading some farmers to consider walking off their land for good.

“The same thing will happen in New Zealand, it will move through the country quickly. Because it's human-assisted. And if it's a female, and she's able to lay eggs, she'll establish a new population very, very quickly," said New Zealand Plant & Food Research scientist Dr Max Suckling.”

Notes: The value of New Zealand kiwifruit export earnings in 2017/18 was $1.859 billion.

The quarterly report, published by the Ministry for Primary Industries, shows total export revenue from horticulture is forecast to rise 5.9 percent to $6.4b, driven by kiwifruit, apples and pears.

Photo by illo media

3. The benefits of flexible workspaces are getting harder to ignore.

Kiwi drivers battling through endless congestion and road closures just to get to work will be unsurprised to hear that long commutes are terrible for the environment as well as their own mental health. A new study that looks at the effects of moving to flexible or co-working spaces located outside of central cities. By moving to this model, New Zealanders could save an estimated 7,931 hours per year in commuting time equating to 138 metric tonnes fewer carbon emissions per workspace, per year. Globally, the figures quoted by the Suburban Economic Survey are even more impressive:

“New research reveals that, by 2029, ‘outer city’ office spaces will reduce carbon emissions globally by the equivalent of 1.2 million transatlantic flights between London and New York each year.

That’s 2.5 million metric tonnes of carbon stopped from entering the atmosphere annually, just by working closer to home.”

“The rise in local working is largely driven by big companies adopting flexible working policies; moving away from relying on a single, central HQ and instead basing employees outside of the major metropolitan hubs in flexible workspaces.

The study also revealed the economic benefits of these suburban spaces and found the ‘flex economy’ could contribute more than NZ$401 billion to local economies in the next decade.”

While the percentage of co-working space in New Zealand is still tiny – 2% of office space in the Auckland CBD according to a Bayleys report, it is growing fast by international standards:

Source: Co-working resources.org

Photo by Crew on Unsplash

4. Coronavirus: Where’s the immunity to price gouging?

A chemist chain in Adelaide is currently selling 10 P2 face masks for A$700. Before the coronavirus outbreak, the same box would sell for A$40-50. Morally this seems offensive but is it? Since Adam Smith’s The Wealth of Nations, we believe in a free market economy where supply and demand determines price, and people are self-interested. The implications are that opportunism is ethically acceptable so nobody should be shocked if a business owner raises prices by over 1000% in times of high demand and low supply.

Channel 9 in Australia reports:

“With the Coronavirus poised to go pandemic, profiteers are exploiting global hysteria and charging Australians hundreds of dollars above normal prices for protective face masks.

Pharmacists and online businesses are among those suppliers accused of capitalising on the public's panic, by charging exorbitant prices for products usually available for a couple of dollars.

The Chinese government is cracking down on extortionate pricing, but in Australia retailers are quick to blame spikes in prices on sneaky wholesalers.”

Photo by illo media

5. Australians are piling back into housing again.

So much for the downturn in Australian house prices. Predictions are that 2020 will mark the fastest market recovery in Australian history. Just half a year since the market bottomed out, the Australian housing market has already clawed back all but 1.7% of the value decline.  If growth continues at this pace, current projections are that the market will have fully recovered by April this year. Unlike other recoveries the largest cohort of buyers jumping into the market are owner-occupiers, rather than investors, who are taking advantage of the low interest rates and falling prices.

According to Business Insider Australia:

“Since national dwelling values bottomed out 8.4% below their peak at June 2019, the Australian dwelling market has quickly recovered 6.7%,” head of residential research Eliza Owen said this week in a Corelogic note.

“If growth rates continue at the January trajectory – of 0.9% value growth per month – Australia’s dwelling market would make a full nominal recovery by April, marking a 10 month recovery period since values found a floor last June,” Owen said.

While that trajectory is hardly guaranteed, it would mark an extraordinary turnaround if it did come to pass. The closest comparable bounce was registered more than a decade ago in the depths of the global financial crisis (GFC). As panic gripped overseas markets, property values in countries like the US, Spain and Ireland imploded. While Australia got off relatively lightly, prices dropped sharply over the course of 11 months before soaring back into positive territory.”

Whether it will be sustainable is open to question as many Australians, like their New Zealand cousins, are facing stagnating wages.

6. Is the world now ready for plant-based meat?

Red meat production is big business in New Zealand. It’s our second most exported commodity and worth over $9 billion. Now Auckland-based Sunfed Meats, a small company producing plant-based “meats”, is launching two new meat alternatives. When the company launched its first product in New Zealand in 2017 followed by expansion into Australia, the meat industry felt threatened and the then Australian Agricultural Minister tweeted “not happy with the latest fake food push ... we need to protect our farmers". With three products now and a capital injection, the ‘threat’ is bigger than ever. Let the market decide if it wants a plant-based meat alternative, and industries that ask for protection are generally not worth protecting. Austrian economist Schumpeter called this ‘creative destruction’, where industries that can’t stand on their own two feet anymore get replaced by new ones. Time will tell if David really is a threat to Goliath.

Stuff’s Bonnie Flaws recently interviewed the founder of Sunfed Meats:

“The company that bought chicken-free chicken to supermarket shelves around the country has plans to build manufacturing plants around the world.

The founder of Auckland-based Sunfed Meats, Shama Lee says western markets in particular are now "well primed" for the introduction of its meat free 'meats', while Asian markets are waking up to such products.

The company's sales have grown 170 per cent year-on-year, and 30 per cent in New Zealand in the last quarter.”

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9 Comments

Decreasing population is the gift that keeps on giving. We are well into an existential crisis (ecologists call it overshoot) and we're entirely dependent on resource-draw-down. Entropy is a key factor also, seemingly overlooked by economics. Japan is lucky.

Food is all about EROEI - Energy Return on Energy Invested. If the plant-to-mouth pathway requires less energy, it will win. The bigger problem is the reliance of all agriculture on fossil (and by definition finite) energy. We have no planb - certainly not for 8 billion.

Decreasing population is the gift that keeps on giving. We are well into an existential crisis (ecologists call it overshoot) and we're entirely dependent on resource-draw-down. Entropy is a key factor also, seemingly overlooked by economics. Japan is lucky.

Food is all about EROEI - Energy Return on Energy Invested. If the plant-to-mouth pathway requires less energy, it will win. The bigger problem is the reliance of all agriculture on fossil (and by definition finite) energy. We have no planb - certainly not for 8 billion.

6. Do the writers seriously believe that 'industries that ask for protection are generally not worth protecting'? So no consideration of public good in national policy settings? Would they prefer all heavy transport to be road, not rail? All research and production in the cheapest territories possible? Etc. Numerous industries may not 'ask for protection', but many (I'm not involved in any) are rightly considered of value to social and economic well-being. The industry hosting the writers, Massey University, is among such, and is well 'protected'. The bald assertions of globalisation and industrial 'road-kill' are no longer credible positions.

Your example I would class as infrastructure (Road/Rail) ..trucks destroy roads and need constant maintenance so that we can all use them - rail is efficient (but needs large capital investment) so one day we might even have some proper public lines to use (Auk - Hamo?)
As for plant-based meats versus the real deal.. it is all about taste and texture..if they are the same I would rather go with plant-based. If I were a farmer I would be looking long term at this trend and making some plans to adapt (rather than moaning about it or trying to make the word milk only refer to baby cow milk)

A good test for a new idea is to produce it to its extreme and see if it still holds good. If the whole world's population were to totally adopt plant based foods I doubt that there would be enough arable land available, not to mention the vast increase in the use of fossil fuels and machinery that would be required to produce the necessary volume. Laboratory grown food is not the answer either, as it requires a feedstock - current experiments use sugar and evidently have an efficiency of three to one i.e three units of input for every one unit of output. The world will be eating meat for a while yet.

Good on the pharmacy for raising its prices. It's not Australians who are buying them, rather Chinese who are selling them on the internet back to China for a massive profit. Why not keep some of that profit in Australia?

I don't understand why folks think they need face masks, when an ordinary scarf will be equally as effective as a spread-prevention barrier. And that, to my understanding, is all a face mask is.

A face mask doesn't keep the virus away from he wearer of it, it minimizes the risk of the wearer from spreading the virus (if they have it) by trapping infected droplets expelled through coughing and sneezing. Even hospital workers in full body protective suits are catching the virus.

The P2 mask standard is roughly equivalent to N95 which is meant protect the wearer from the virus.

Marketing spin. The hospital workers are wearing far more extensive protection and still contracting the disease.