Bernard Hickey asks if voters and investors use long enough time horizons to make decisions, and whether the election result would have been different if they had

Bernard Hickey asks if voters and investors use long enough time horizons to make decisions, and whether the election result would have been different if they had

By Bernard Hickey

Decisions about voting for a party or employing a person or investing in some new system or machine or product are difficult things at the best of times.

So changing the way we make these decisions makes them doubly difficult, but it can create a big payoff.

Let me make the case for changing the way these decisions are made in a fundamental way.

Collectively, by the time you read this column, you will have made one of those difficult and irregular decisions about who to vote for. Now the decision is made, it's worth reflecting on how you made that decision.

Did you analyse the pros and cons in any rational sense?

Did you look at the trade-offs involved and the likely outcomes of the various scenarios?

Did you create a spreadsheet that looked at the costs and the benefits?

Did you come up with number which said you would be better off with one party or another?

Did you look at just the cashflow implications or just the balance sheet implications?

How long was your forecast horizon and who's interests did you consider?

I'll assume you were all perfectly rational and informed voters who spent the time and effort to do that analysis. Some might say that's being generous, but let's give everyone the benefit of the doubt on what should be a day of celebration for some - or at least relief that it's over.

So you might have worked out what a change of Government might have meant relative to the status quo.

You could have worked out what a 15% Capital Gains Tax, a 36% top income tax rate and trust rate, compulsory KiwiSaver, lower (or higher) interest rates and more (or less) Government debt meant for you personally.

Politicians are often fond of characterising these decisions in a way that a certain policy would increase your take home pay by x or reduce your costs by y, or increase the value of your home or the country by z.

That boils the decision down to a simple number and often assumes something quite dangerous - that the voter only cares about their own immediate incomes and costs.

Sadly, that's often how votes and spending and investment decisions are made - for the short term and from the point of view of today's consumer.

That seems natural in a world that celebrates the individual and the now, but it's not how everyone has done it for all time.

Just imagine if those decision horizons and points of view were changed.

This question cuts right to the heart of how personal finances and governments and societies and companies evolve, and often whether they succeed in the long run.

For example, investment decisions in China, for example, and by many family owned businesses are taken from the point of view of a family over multiple generations.

Assumptions are made about investment returns and current consumption that would make no sense to a consumption-focused individual today.

Decisions to invest in land or business assets or education make complete sense when you take into account the effect over decades and centuries rather than weeks or years.

Assumptions about likely investment returns, or in the jargon - discount rates, make massive differences to the projected outcomes.

So let's have a thought experiment.

If you had taken into account the multi-generational impact of the decision you made this weekend and assumed very low investment returns (perhaps as low as 2% or 3% over the long run) for the societal 'assets and liabilities' you invested in, would it have been different?

For most of the last three hundred years, long term interest rates have been between 2-5%, not the 5-15% seen for the forty years from 1960 to 2000.

Families, companies and societies that invest in assets that offer steady returns for the very long term, but not necessarily instant gratification, often generate the best results over the very long term.

So why don't we make all our decisions that way?

Some societies and families and companies do, but in New Zealand in 2014 most don't.

As you sit back and reflect on the election result, have a think about whether it would have been different if everyone had taken a multi-generational and long-term investment approach.

Would your vote have been different and would the overall result have been different?


A version of this article first ran in the Herald on Sunday. It is here with permission.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Bernard , you appear to dream that the average Trevor and Trevina in Struggle Street NZ care as deeply about politics as you do ....
... they don't !
But that doesn't mean they make stupid decisions , either ....
... voters don't want massive changes to the status quo ( i.e. a CGT , whose promoter's can't explain it ! ) , they don't reward outsiders for an 11'th hour blitzkrieg ( Nicky Hager / Kim Dotdum / Greenwald / Snowden / Whaledump / et al ) , and they don't want a PM who can't connect with the people ( Cunny !!!! ) ...
We got a clean result , Gnats get 3 more years , no fuss , no Winnie holding us all to his ransom , Labour get another opportunity to rejuvenate their party . Excellent !

Cheers Gummy.
It was a very broad piece written on Tuesday about decisions more generally -- both investing and voting.
Just asking the question really about the time horizons people use in those decisions. Not really a question of caring or not. Just the time horizons people use.

Bernard , a shame that you were hidden away here last night , everyone else was watching the TV1 or TV3 coverage ....
... would've enjoyed seeing you on one of those programmes ....  they seriously lacked your input on matters financial ...
Cheers : Gummy .

Cheers Gummy.
Happy to be hidden away. Quiet life not such a bad thing. Really enjoyed being at home watching it on the telly with family and friends and doing my little thing. Others are much better at that overall politics and psephology thing.

Hi Gummy
Interesting you mention the TV coverage. Agree with you. Certainly everything on the screen could have benefited from more people present.
I thought TV 1 coverage was boring. Most of the time we had to listen to Hosking and Street talking among themselves. Of course I have no objection to watching Toni Street on TV but there was no panel discussion and the fun that generates.
TV 3 had a panel and their coverage was much more broad based, but only about the politics of the results as they came in. They had some funny reporters taking the'mickey' though. Still... it didn't quite seem like the old days of lots of panelist and on-screen arguments.

Although the leaning of the government elect is not my preference, given the writing has been on the wall for some weeks as to its general shape, it is probably best National can govern alone. There can now be no excuses that a coalition partner has muddied the picture somehow.
A few questions come to mind in terms of where New Zealand will be during and at the end of the next three years.
Will New Zealand's business model largely still be selling assets and debt to fund a city lifestyle? Given house prices appear to already be as high as they can go relative to rents and incomes in Auckland at least, will that mean more foreign assets sales rather than debt to fund the overseas holidays? If this capital gain slows down, will there be a squeeze between wealthy people and poor people, and at which end will that squeeze be applied? Where will rents be?
Where will interest rates be, and what effect will that have on disposable incomes and asset prices? Will that be a further transfer of wealth and income from the indebted and non asset owners to the wealthy? What will be the economic and social impact of that change?
Will National (hopefully)find some excuse to modify the Reserve Bank Act, or will they carry on with a structure that guarantees a current account deficit and loss of assets and wealth by New Zealanders?
Given demographic changes, and the loss of electricity company dividends, is the thought of a fiscal surplus just National spin with current tax settings? Will we actually be in surplus in 3 years, or will National's spinmeisters come up with more excuses?
Will they raise GST? See squeeze on poorer people above.
Where will power prices be? See squeeze on poorer people above.
Will any kind of solution to Auckland's transport issues continue to be a mirage on the horizon?
Will corruption at the top levels of government be endemic and beyond recovery, given it seems to have been given a big tick by the electorate this time round? Will Judith Collins be back in cabinet?
Just a few questions that come to mind this morning.

Good questions Steven L and I make some similar ones at 'National wins 2014 election' thread.
I wish Labour also were clearer in answering these questions and had a broad long term strategy on how to achieve this. They need to have a serious look at their strategy and their political machine.
Personally I think Cunliffe did ok on the campaign and could gain the respect of kiwi voters given enough time and if he reformed Labour back to its roots of being a workers party.

Nah. Follow Bernard's long term view and keep Cunliffe.  He shows he will grow into the job.  Next they need to get rid of their old relics pronto. Say six or ten in the next year.  The young replacements will be patchy - but how else will they find the future stars?  Keep up the long view (yes Bernard) keep up the exiting - and in 2020 and 2023 there might be some talent on board with some appeal to voters

Will New Zealand's business model largely still be selling assets and debt to fund a city lifestyle?
"Selling assets" - no choice really, under current policy settings.
Current NZ debt growth levels and the estimated rates of interest due demand nothing less.
The necessary explanatory background can be gleaned from Pimco's Bill Gross' most recent musings:
A credit-based financial economy (as opposed to pure cash) depends on an ever-expanding outstanding level of credit for its survival. Without additional credit, interest on previously issued liabilities cannot be paid absent the sale of existing assets, which in turn would lead to a vicious cycle of debt deflation, recession and ultimately depression.
It is this expansion of private and public market credit which the Fed and the BOE have successfully engineered over the past five years, while their contemporaries (the ECB and BOJ) have until now failed, at least in terms of stimulating economic growth.
The unmodeled (for lack of historical example) experiment that all major central banks are now engaged in is to ask and then answer: What growth rate of credit is enough to pay prior bills, and what policy rate/amount of Quantitative Easing (QE) is necessary to generate that growth rate?
Assuming that the interest rate on outstanding debt in the U.S. is approximately 4.5% (admittedly a slight stab in the dark because of shadow debt obligations), a Fed governor using this template would want credit to expand by at least 4.5% per year in order to prevent the necessary sale of existing assets (debt and equity) to cover annual interest costs…
How are they doing? Chart 1 shows outstanding credit growth for recent quarters and all quarters since January 2004. The chart’s definition of credit includes the standard Fed definition of private non-financial credit (corporations, households, mortgages), public liabilities (government debt), as well as financial credit. The current outstanding total approximates $58 trillion and has been expanding at an average annual rate of 2% for the past five years, and 3.5% for the most recent 12 months.
Put simply, if credit needs to expand at 4.5% per year, then the private and public sectors in combination must create approximately $2.5 trillion of additional debt per year to pay for outstanding interest.Read more

Is it correct for me to think along these lines?
The USA is starting to taper, this is causing the US $ to strengthen. The printing was filling the hole in the credit market left by the banks not lending, now it's Taper time the shortage of US$ required to pay the interest is forcing the currency higher.
The drop in oil consumption has a huge effect on US$ creation, as does China/Russia dealing in their respective currencies.
  We also are starting to run short of the dollars required to fund our debts, the drop in demand for our agriculture products from China is one major problem, its a game changer for NZ.
 If we don't export enough to pay the interest biil, will the required borrowing to fill the hole force interest rates and our $ higher?
 This is assuming the government doesn't try to borrow on our behalf, and even if they did I doubt it would get it to the source of the problem and  falling tax takes could limit their ability to borrow cheap anyway.
 Thanks Aj

Will be very interested to hear Stephen's opinion on your scenario. 
Here's my guess.
I think the government will borrow more and it will pay higher premiums to do so as it simply won't be able to adjust policy initiatives quickly enough to compensate for fallling tax takes. The first thing I think we can expect is a rise in GST as a means to try and keep a lid on their interest rate costs on new debt. But our creditors will want more convincing.
On asset sales - there is always Landcorp and the Conservation estate. 

Doing that will result in a compounding requirement.

Which won't be a problem if population contribution is growing at the same rate (real inputs) but the exponential growth of population is limited, and it is also non-uniform across the population (resulting in higher growth in low value areas, and low growth in heigher value areas - it's easier to have several poorly maintained and poorly educated kids, than high maintenance/education kids).   

When the two forces are roughly equivalent the system will apear to work, as the incoming credit will be matched by incoming real inputs.
 But as the population start being affected by it's real world constraints, separation will occur.  resulting in falling value, the 4.5% will no longer be enough - but the more that is introduced at that point will only cause devaluation of future increases in real terms  (ie the 4.5 just won't do the job it used to ... they'll need 5 to do the job of 4.5.

Yes Bernard , I have a long term horizon when voting . I am trying to build a reasonable nest egg for our retirement  , AND IT DONT WANT TO HAVE IT TAXED and sqaundered by a left- wing administration .
Particularily  when we have paid so much in taxation already over the years .

Actually, I make the decision based on how it will affect my children and the country as a whole. Nats may be good for us personally in the very short term, but our children will be burdoned with this high debt, the money will come from education, health, prob infrastructure etc. Jobs created at the moment and our GDP revolve largely around construction for CHCH and overall immigration. The increase in this social divide may also create unrest and a less safe place for my children.  The TPPA will suck any resources and sovreignty we have left, I would gladly pay a CGT to redistribute my wealth. The extra 100$ in my pocket will not be near enough to the thousands Ill need to give my kids to put a mortgage on their first homes.  

Madness - I think we all make our voting decisions on exactly those factors you state, its just that there's a difference of opinion as to how to achieve it. Frankly I voted National because I think its in the longer term as much as the short-term that they're right for this country. They know full well that support for the economy from the rebuild starts to run off in 2-3 years, do you think they are just going to sit on their hands and hope something turns up ?  They're certainly shown not to do that even when politically difficult. TPPA is part of that and it will only come in if NZ as a whole gets a better deal from being in it than out of it -  would we expect anything else (and don't give me this conspiracry bulls*t)  ?
The social divide isn't widening, thats just misinformation, but there are definitely issues acknowledged by all, but what do you do about it ? - in general those having a hard time currently are either on a benefit or low skilled, and consequently unable to provide the skills required to get a higher standard of living for themselves and their families - and if the ambition of a new Govt is solely to "give them" a $2 rise in the minimum wage to $17-$18, that's displaying zero ambition for these people. But more training is being undertaken and people are going off the benefit in increasing numbers and inproving their situation -  that will be ongoing now as much as the economic cycles permit which no Govtr is immune from. The problem is that there is too much hysteria and loud rhetoric on the subject and only one partry with a creditible plan - the majority of the public saw that and voted that way. 
The redistrubition of wealth argument, whether through CGT or higher and newer taxes,, has never worked throughout history to improve the situation on a long-term basis and the majority of NZers understand this. Those that keep citing it as the solution are destined to remain outside of Govt, or to forever be frustrated bloggers blaming the public for their "lack of foresight".

How did NZ benefit from it's trade deal with China?

Serious question Andrew ?   I think you can answer that yourself when the $5 something pay-out takes $5bln in dairy income temporarily out of the NZ economy over the next 12 months - it won't be a feel good. 

 Very serious.  China has stopped buying off us. Maybe over Taiwan's inclusion in TPP.

Told you their neighbour's didn't like playing with them.

from the link supplied:
"Taiwan relies on exports for about 70 percent of its GDP—with 40 percent of those going to China. Critics say the services agreement would make Taiwan even more economically dependent on China and eventually allow the latter to seek political concessions."

What?  would our besties do that.... 

So what's the point, don't do trade deals, don't increase your business and trade with anyone in case someday they reduce it or take it away for you ? Can you imagine any successful business that operates that way ?  You do all the business you can, you diversify as much as you can, you cement relationships and look for others, but someone who takes the "no risk" option you seem to be suggesting underperforms, and in this case under performs for his/her country. Thank God for the commonsense of NZers that this sentiment wasn't allowed to have power and that we still have some ambitions for this country and to be better than mediocre

I was more concerned that we have become so dependent on China, which is still a command economy.
Our biggest competitor in the WMP market is the powder we sold to China before Christmas.
 It looks like the rest of the world didn't really need our increased production and we are left with the debt we borrowed on the speculation.
 I just think it was obviously a bubble, unsustainable and dangerous just like the housing bubble.

No dount there is a risk Andrew, and we need to diversify it, but you don't not do the business because of it, rather you manage the risk. We had a similar situation with the UK before the EU killed off that market but in the time prior to that it made us one of the richest small counties in the world for quite a long time beforehand. So we've seen it beforehand and Key himself had mentioned the risk several times in the past, hence the reason the Govt is working so hard on other free trade agreement etc and diversifying into the rest of asia, the middle east and others. 

Which would work if we had the right cost structure. As it is the EU and the USA are going to be large exporters and Brazil is just starting to export. At a time when the market is oversupplied the USA and the EU are increasing production.

Yup there are risks but currently few can produce milk at less than the equivalent to $6 p.l. (neither can we effectively but more able to than most) i.e. we are one of the more cost efefctive producers currently 

It wasn't very long ago that dairy farmers were humming along nicely at a $4.00 payout.  Its been the most disapointing thing about National, it hasn't tackled the cost structure, reined in councils etc.
 Thats why cowboy losses the plot, all he earns goes elsewhere not leaving enough for the owner/sharemilker

Those $4 times were like chalk to today's cheese, Aj.  Reason being, back in those days the co-op dairy companies 'smoothed' the payout by holding back funds in good years to pay out in not so good years.  That helped to keep costs relatively stable.  Today Fonterra (as the largest co-op) can't do that - due to TAF, even if it wanted to - which it doesn't.  Hence now when it is flush, it pays it to the farmers, the  retailers/contractors etc see that so up their prices - up go costs.  When Fonterra doesn't do so well, it cuts payout to farmers, but all the retailers etc have set in stone their profit structure based on higher charges to farmers, so when farmers get less as milk price, their costs remain based on those higher payouts.
Local and Central government costs are higher, but one of the biggest issues to the real cost is in the time I need to do the paper work for it all.  Tax/ratepayers demand bigger and better everything from councils and somehow that has to be paid for.  
If Fonterra had practiced 'smoothing' out the payout dairy farmers may have found that their costs didn't rise so quickly and by so much.  But that was never going to happen once Fonterra was formed.

There are also other costs - labour being a big one, and the cost to reduce risk there.  Electricity is hitting us in the shed, especially with the new MPI legislation for cooling.  

Equipment isn't lasting as long, and costs more to replace, and frequently only does 90% of what it's supposed to.

Fuel and equipment prices are hitting heavy across the board for supplimentary feed, and with landuse rules just around the next corner, we're going to looking at some serious covered pad costs (with effluent handling etc).  That's a huge outlay, the interest alone is a problem on this payout.

GST really cuts into profits too, as any principle repayments get a double whammy of GST and Income tax (ie 45% tax rate!)  .  And without good principle repayments, the 6-12% (mortgage/overdraft) interest-tax  is crippling.

And I'm wanting to find out why the grass isn't performing as it should in this temperature/moisture level - can I afford an expert? nooo.  Most of them are just mouths for fert companies anyway.   And even then, unless I've paid off the farm (and have no principle repayments), I probably can't afford the improvements an expert would recommend, let alone the risk associated with failure of such investment.

So with that data, I think we've lost the low cost WMP/dairy battle to China.  The only survivors in NZ will be niche and direct-to-market value adds.  Fonterra won't have the volume here much longer to make NZ worth the effort.

- - -
Oh and just a random safety notice for farm folk - don't use orthodic footwear or inserts driving tractors.  Dismounting the vehicle on uneven ground is a very easy way to bugger your ankle....   I mention this so folks will pass it around, as it's not immediately obvious (beforehand...)

and then there's the cost of accidentally putting the whole milking down the drain becauise you're so tired and sore. again.

Aww Cowboy nooooo. At least it wasnt antibiotic in the milk

True Andrew, but there hasnt been a pay-out under $4 in 12 years. Farm costs are higher, interest well lower, but it isn't just a NZ issue. The patterm now seems to be an average of around $6-7 over the past 7 years with every third year around $8. Commodity cycles reflect cost over the long-term, but in the short-term we have to survive the low points. A pay-out in the mid-low $5's will create losses for most dairy farmers but after a year of $8.60 it won't be a problem for either them or the banks, its just part of the cycle that farmers are well used to. And the forward prognosis still looks pretty good over the medium to long-term despite more supply definitely coming on stream

Yes but now we have real competition while NZ  farmers have inflexible systems that require high imputs.  
 I'm worried you are heading down the same path as meat and wool and the competition is coming fast.
 From California dairy producers weekly report.

Milk production continues to rise around the globe, and the U.S. is 

no exception. Domestic milk production totaled 17.22 billion pounds last month, 2.5% more than August 2013. This marks the eighth consecutive month of year-over-year growth in U.S. milk output thanks in large part to improving milk yields. National average output per cow was 1.9% greater than in August 2013. There were 9.276 million cows in the milking herd in August, 47,000 head more than last year. While this is 1,000 head fewer than in July, USDA revised its July estimate upward by 5,000 head, so the August herd remainslarger than USDA’s initial July assessment.


The EU15 weighted average price stood at €38.04/100kg (31.09ppl) in July, €0.40/100kg (1.0%) down on June, but was€0.89/100kg (2.4%)
higher than the July 2013 average.
Looking at the top-five milk producing countries for this month (Germany, France, UK, Netherlands and Poland), the average July price was €36.85/100kg which was a €0.45/100kg (1.2%) decrease compared with the previous month.
From a production point of view, June of this year saw EU-28 milk deliveries to dairies standing at 12,731 thousand tonnes (equivalent to 12,364 litres).
Compared with the previous year, this is an increase of 505 thousand tonnes (4.1%) – equivalent to 490.9m litres.
Comparisons between years showed that of the EU-28 member states, 25 showed an increase in deliveries (in thousand tonnes) between June 2013 and June 2014, while 2 member states showed a decrease.
The five largest milk producing members in June 2014 (Germany, France, UK, Netherlands and Poland) produced a combined figure of 7999.4 thousand tonnes (7,768.7m litres) which was 342 thousand tonnes (4.5%) more than the previous year equivalent to 332 million litres.
Romania showed the largest year on year increase in percentage terms with June 2014 deliveries at 101 thousand tonnes – an increase of 15.2 thousand tonnes (17.7%).



For farmers that aren't high indebted would it be that hard to switch back to the clover ryegrass system that has done us so well in the past? Batten down the hatches and lower the cost inputs.

cowboy and C/O would know better than I would. However on a beef unit a lot of the costs are council rates, road taxes,insurance, NAIT etc, inflexible and always expanding.Transport for Fonterra must be a nightmare.  Its a big deal never talked about in the MSM, one we need to have a serious think about.

NZ inc has hooked its wagon onto a Fresian cow that is running out of puff.

profile, we trialled wintering some cows on grass and balage only this winter - in Southland. Our sharemilkers were so pleased with the result that we are switching to almost all grass/baleage wintering next winter.  Usually we would winter on fodderbeet/baleage with a paddock of swedes for when springers come back to farm.  Having said that, we don't use PKE, and we have always run a fairly simple system.  The grass/baleage wintering option is not common in Southland but there is an increasing number of farmers trying it.  It wouldn't be for everyone though due to debt levels.

Do you feed the winter feed in paddock or pad or covered pad?

How well do you find the mid to late calving paddock cover wedge?

I find its a system that works well, but the limits are on what the cows can eat in balage. "milking quality" balage is great, but expensive and hard to convince contractors to cut that early.  rougher quality is ok as it keeps the animals warmer during the colder time, but there is a distinct limit to palatablity (at which point the buggers sit on and won't eat it's a good sign if they eat sat on balage/hay then they're too hungry)

Is the dairy industry  a rhino stampeding after production, with profit the skinny african hiding behind a tree, that the half blind rhino cant see. The clover ryegrass production system has taken a beating I think. With the droughts, the clover weevil, the excess nitrogen usage beating clover into retreat. It looks good at a distance, but up close can be ugly... especially waikato and north ie buttercup and fresh air.  I wonder if the change has been so fundamental has it gone past the point of no return in relation to debt requiring high feed inputs. I would imagine a good bit of the debt is effluent related if all those new massive inground pools  is any thing to go by. But no matter beef is the new milk. Up up and away...

It's getting the production levels out of clover ryegrass to justify staff levels and future investment that's the trouble.
 As you've identified, it doesn't take much to start shifting out of the profitability niche (aka sweet spot).  Start adding a few things here and there, a bit of PKE...and trailers...and handling. A bit of grain...inshed feeders...monitoring..maximum feed pricing.  Doing that without the commitment to high end production (eg having your own barley growth) can be just as bad as chasing production other ways.

Its the same in beef. Why winter stock, when you have to make and feed out something to them. The cost of running a tractor, then fixing the mess one makes. You get caught up in production very easily and forget its really about profit. Those tractors have a lot to answer for. They enable you to do so much, but sometimes it is just not profitable to do all that work.

Only if you think you can teach the cows to urinate in litterboxes.

The constantly increasing cost of operation (labour, rates, insurance, fetilise, fuel, power, supplimentary (winter) feed) making it increasingly unfeasible.  The grass system is nice, if you already have that capital behind you and don't expect a return on it,  But with nutrition limits coming into play, you're talking low production, high acreage... and it's just so hard to get staff.

I've just had four days (medical) break.  Got called back every day for something.  And the weather turned nasty, but the person managing the animals/milking while I was gone didn't notice that the cows were starving (production dropped 30%, and looks like they lost 0.5 condition score while I was away).  Just can't get the people, and without a decent payout, can't pay or train enough to split tasks.

 Would be interested in hearing if anyone else has tried that Gibberellic acid.  I'm sure that's the culprit.  I use 80% of stated dose when spraying the buttercup.  Paddocks over last 5 days look like 2900 cover, which is presenting 18-20 each....but residual is around 1300-1400 which speaks of grazing at 9-12 each.  As mentioned production and weight have plummeted (way more than weather alone can account for).   I'm concerned that the nutrition which should have gone into the plant, has gone into make it physically bigger (thus actually less food value).
 It looks great...but the animals are starving on it.

I have wondered the same about gibberelic. Interesting what you are thinking. Neighbours use it. Must get round to asking them about it. Does it not just make the cells bigger? It just seems too good to be true type of stuff. Sometimes I feel I am paddling against the tide on the beef farm Cowboy, and other times I think I am doing well. I certainly wont get rich here in monetary terms. But I do notice things like if I need something fixed or I want to buy something I just do it. Now not many of us middle income types can still do that apparently.  I did some poll a while back on where I sit in the income stakes. Turned out I wasnt that far from the top. Which utterly shocked me. I dont travel overseas, couldnt really afford that, my house needs serious work, which I am going to borrow to do, I do have a decent wagon, whew, but really if I am at the upper end, then that doesnt say much for NZ. edit to say towards the upper end. Lol I think the upper upper end is many eons away.

very true.

The gib acid is the hormone which tells the plant that it needs to stretch itself taller to be ready for flowering/seeding.  I was hoping it would increase surface area, thus light received and so photosynthesis early in the ryegrass growth cycle, especially in the cold days.
 And it certainly does that.  As mentioned significant growth compard to the strips not sprayed.

But the cells used to stiffen the plant in flowering are the undigestable cellulose.... and that would fit with what I've seen ... we're getting plenty of poo, like they were well feed... but the production and the weight loss are horrifying (and I don't actually like cows, so it's pretty bad) and completely at odds with the feed level we should have.  I'm actually having to feed out more hay, which at cover which should give 18kgDM/head is crazy.

Crikey with mating round the corner a lot of weight loss is the last thing you want.

yep. and the person covering for me ... "yeah I thought they looked pretty light"  (I'm known for my slightly too heavy cows)"

I'm in desparate need for a break - but wtf can I do.  I drop my guard for an instant and stupidity runs riot.

Had downed cow on last break/sick/releif day (saturday).
   Went to get tractor.  it had broken gear lever and rear lifting arm, so I'd asked local engineers to get prices for parts.
 Three weeks later, he turns up and repairs the gear lever and lifting arm while I'm at milking...but now tractor won't start (in this emergency).  turns out there's a safety switch I didn't know about on the base of the gear lever, and when he'd repaired the gear lever he had reset that properly.   So instead of break day I have downed cow and emergency repair tractor day.

MOTH spoke to some dutch farmers recently who were rueing quotas coming off due to the lack of control of production quantities causing what they see as further falls in milk prices still to come.  If they felt that way before Russia banned EU dairy product, they didn't say.

I agree.  Every time we get a payout drop, Fonterra says it's because volumes were up.  Global increase in production can't bode well.

Is that EUR 36 /100kg  about $5 NZD kgMS?  (using 10% MS per litre raw milk)

what do you mean temporarily?   Are they going to pay back the $5b later?

Pay back ?  what the hell are you talking about cowboy ?  of course  not - my point is that on current forecasts there will be $5bln less income coming into the NZ economy in the next 12 months because of the drop in the dairy pay-out ,which equally most forecasts suggest will only be temporary. That will hurt but we will still be well ahead of where we were before Labour signed the free trade agreement with China some years ago. Is it better to have never had the income at all, than go through inevitable commodity price cycles where when you swing low youre still well ahead of where you'd be without a free trade agreement ? The mentality of that thinking is so hard to understand.

we will still be well ahead of where we were before Labour signed the free trade agreement with China
Our free trade agreement(s) with China allow NZ to export some dairy commodities there with lower tariffs than our competition. At the same price that makes us the preferred supplier. At a price higher by the tarrif difference I assume we become an equivalent supplier.
Does that in the long term allow us to push up our cost of production and price by our tariff advantage?
Our free trade agreement(s) with China allows NZ to import many manufactured products with lower tariffs than their competition. At those lower prices has local manufacturing had to cut their costs of production to compete?
Lower tariffs intentionally reduce government income in both China and NZ.
Where is the full analysis of the costs and benefits from our free trade agreement with China? Including the impacts on NZ costs of dairy commodity production, the government revenue lost in encouraging increased dairy commodity exports, and the impact on local manufacturing.

to understand whats in it for us, best see where they are coming from (accepting dated Feb 2014).
conclusions aside, some of the examples and figures are worth a look.
http://China’s Dairy Dilemma The Evolution and Future Trends of China’s Dairy Industry
we've not seen the before.

Hi Henry.
Your first link isn't functional, the second is fine.
In 2008, then-candidate Obama described his disagreement with NAFTA. “While NAFTA gave broad rights to investors,” he said, “it paid only lip service to the rights of labor and the importance of environmental protection.”62 Ironically, the TPP negotiations today give corporations far more than “broad rights.” “Having seen what I’ve seen, I would characterize this as a gross abrogation of American sovereignty,” Rep. Alan Grayson told the Huffington Post after finally getting a look at the TPP texts, “And I would further characterize it as a punch in the face to the middle class of America. I think that’s fair to say from what I’ve seen so far. But I’m not allowed to tell you why.”63
Ultimately, what we see in the TPP isn’t anything futuristic, but a double down on old, bad ideas. The level of secrecy is unprecedented, the power given to corporate advisors and experts is unprecedented, and the work to dismantle local regulation goes further than any deal we’ve seen before. The choice inherent in the notion of a “21st-Century Trade Deal,” is who the 21st century belongs to—will food policy continue to go down the road of 20th-century neoliberalism that never really worked, or will it be decided by consumers and the officials they elected to represent their interests?

I haven't seen many of those elected officials working in the fields to product the food they're policying about (and also note that the policy people make 4 to 6 times as much as those actually making food that is eaten...)

Cowboy, you have a deadline, according to the Johnny and the Feds, double production by 2025, it shall be done.
 Otherwise the spring board will become a waterboard. You have 10 years left, choose your time well.
“We see the 2014 General Election is a vote for New Zealand to become a primary superpower, not only doubling our primary exports by 2025, but by building resilience in our economy through spring-boarding new technologies and services based on our biological strengths, and by adding value to our primary products."

yep, and those who do not comply with the directive will be systematic pushed aside - 'tis the will of the bureaucrats - can't beat city hall (none of whom produce any food)

appolies (fat fingers) maybe this
being: China’s Dairy Dilemma The Evolution and Future Trends 

of China’s Dairy Industry



Sounds similar to the  US oil industry in the late 19th century. Standard oils equivilent will control the sale of product whilst having the clout to destroy producers  profits. Oh joy.

An excellent article Henry and one clearly never read and understood by the leaders of NZ agriculture.
It should be a concern when Nestle is taking a different appraoch to Fonterra:
In response, global dairy giants like Nestle and Fonterra have also started building farms and processing facilities in China, although in different ways. Fonterra, which supplies about 90 percent of New Zealand’s milk, plans to have 30 farms in China by 2020.86 Nestle, an early mover in the Chinese market, has the largest Asian dairy research center in China87 and is training producers to intensify their production without actually buying farms.

And how is that good for NZ Fonterra suppliers and their staff/co-workers?

Colin, Friesland Campina has also a JV in a Dairy Research Centre in China.  A dutch farmer told us that instead of building farms in China, they take Chinese on to Dutch farms to train them.  I could just imagine the outcry from raegun et al if NZ dairy farms were being used as a training ground for chinese dairy staff. ;-)  
My question to you Colin, is why should Fonterra follow the Northern Hemisphere approach to China, instead of rowing it's own waka?

I doubt there is anything in differences between the hemispheres - more just the investment track records of Nestle versus Fonterra:
Which company is most likely to have got it right strategically?
An poll on the subject may be revealing.

import their stuff at lower tariffs would be a better deal if it wasn't for the fact that so much of their stuff is junk quality.

You said that $5bln would temporarily be coming out of the NZ economy.  

Well it's not like it's coming back - that's $5bln, done deal and gone.

Strategically we're worse off, much of our IP has gone to foreign businesses who have much better capital reserves than their NZ counterparts, so we've gained some dollars...which RBNZ is countering, and much gone into taxes and interest repayments.  But we've lost what little commercial advantage we had.

I would like to hear which forecasts are saying it's temporary - all indicators I have seen point to global industrial style high-production units ramping up production by about 10%, lifting productivity to make up for lower margins.  Tighter controls being used to isolate the market (eg residue testing to check stock feed is pure, political pushes to see that vertical corporations own the supply chain).  And very little to say our returns will improve, since it's pretty much all pooled and sold at auction.
 It makes too much sense for high value processors like Danone to take over the whole production process, the cost of their risk is so much higher than the cost of land.

- - 
Not to forget that China is *still* invoking the "emergency" clauses in the FTA to push our returns down.
- - 
And "having the profit" isn't an advantage if we lift our cost of production to do it!  Many people find that a payrise is no good if lifestyle rises with it.  It's pretty much a cliche.

Also it's not good if it costs us strategic assets in the process (eg sales advantage, IP).  That's like selling your house, then having to pay more for rent because you haven't got anywhere to stay.  

Bollocks , tell me how you think Labour / Greens taxing New Zealands Capital base ( when we are hopelessly short of Capital ) is a good for us in the long term ?
NZ is so short of Capital due to previuos Labour tax policy that we cant even afford to buy our own farms .

BH: We are trying to get what we want

this is a good start -  to a very very important topic and one that i would like interest to cover in much more depth.  Most institutional anf family money is a result of smart long term investments - and often skipping a generation for inheritience - ie assets passed to grandchildren not children.
NZ has in ACC- one of the best schemes of its type in the world - - its funding is underpined by a serious long term investment stratgy being and if it keeps faith with this strategy will soon become fully funded - reducing the burden for accident costs for generations to come - massively reducing the need for ongoign taxation for health services - ( be even better if once its fully funded we keep the levies but direct them to a new health service fund of similar nature.   (
If NZ can duplicate this long term strategy -  for health / education / pensions/ welfare  - saving and investing over a long 20+ year period - it could easily reduce the taxation burdens for generations to come and allow us to become a very prosperous and wealthly nation and provide the future we all desire for our children and grandchildren.
Please continue to promote the arguments for long term savings and investments - as governments will always come and go - most policies will be short term in nature - and if we want to move this country from living pay packet to pay packet - this is the type of education we need to provide

12 month plus out I had positioned myself for a nat win and for the recent extensions to kiwisaver. Even if they shocked everyone to the downside they'd still b in with winny n mayb conservatives by giving them an electoric. It's the medias job to make near certainties appear uncertain to get interest, in reality it hurts ppl who aren't able to objectively assess probabilities themselves

What I noticed about the election night is how smoothly John Key framed the agenda as being about stable economic management underpinned by future tax cuts in his victory speech. 
Of course this is just ideology and can be challenged. Stable economic management could come from constitutional safegaurds giving trust in the rule of law and public services. Or stable economic management could come from insteading cutting taxes investing in public infrastructure that the market fails to deliver. Or stable economic management could come changing the rules, institutions and culture of NZ society from investing in unproductive capital to long term productive investments.
It is clear to me that in the next three years John Keys eyes will firmly on achieving his version of stable economic management. He will have all the resources of the government. A battle tested political machine and a personality suited to calmly presenting long term goals.
Any party wishing to challenge this status quo has a lot of work to do to convince the public of an alternative vision. 

Simply , Capital Gains Tax is a losers tax and sensible , educated Kiwis know this , and have rejected it on a massive scale in the elections .
NZ is hopelssly short of Capital ,( to even buy our farms , Banks , and medium to large businesses ) .
Labour and Greens want to DESTROY  any private capital formation initiative by citizens .
How dumb is that ? .
We already dont have enough Capital in NZ to even buy our own farms, so if we tax our own Capital , we might as well hand all our farms and businesses  to the Chinese Communist Party on a plate  

So, bye-bye to Crim Dot Von Schmidt
Who'd tried to trip Gnats down his Pit
Dot's 'Hopey and Changey'
Just sounded Derangey
His tally of MP's?  Jack Schitt.

Bernard - long term investors also look at the management team... and in this case choose to not go with the board selected on its union connections, dead wood old boys club, Maltusian and "diversity" credentials.

that was my bet too.  Only seriously union/ die-hard socialists (and the short term daft believers) would vote Labour that time around.  
  And I think far too many people who felt that they should vote, felt that Winnie posed to much threat of going for a Labour/Green/NZF combo.  As Winnie likes to be Kingmaker, and I don't think NZF positions itself as a sole contender, preferring an MMP game.  I think that would have lead a lot of the "must vote for someone" to pick a stable player.

Sorry about all the posts folks.  as usual some good discussion (sorry to kill it)

I am as ecstatic about the election result as I was when we won the World Cup .
This is a brilliant outcome for ALL New Zealanders .
The threat of 5 new TAXES was enough to scare everyone into voting for National .
What Cunliffe and the Greens fail to grasp is that any new tax is passed on to those of us who get up and go to work every day , buy food , buy petrol , pay rent or a mortgage , save for our retirement ( or to save for a depost to buy a house ) or in some cases employ other folk .
We , the ( actual net ) taxpayers are punchdrunk under the weight of current taxes , plus  supporting hundreds of thousands  of people who contirbute nothing or are not net  taxpayers after transfer  payments such as WFF, Income supplement , free Gold Card , free this free that , free the next thing