It is Allan Barber's view that a misallocation of resources and a misapplication of policies is making the economy brittle, a one-trick pony, now solely reliant on agriculture to pay the bills that are piling up

The New Zealand economy increasingly resembles a one-trick pony with non-agricultural exports effectively reduced to a trickle, because there will be no contribution from tourism until later this year at the earliest, while education is inevitably stopped until the new academic year in 2023.

Because of the long hiatus which means airlines, tourism operators and educational institutions are unable to plan, there is no guarantee these sectors will be able to gear up again to handle renewed demand, even if it eventuates in any volume. Nor is there any certainty staff will be available to replace those who were laid off during the earlier stages of the pandemic.

The government has essentially had one single major objective since the outbreak of Covid 19 two years ago – to minimise deaths at all costs – for which it has been rewarded with enormous voter support, until now. The secondary objective has been to provide support to businesses so they could retain and pay staff, but the longer we have remained in some form of lockdown, the less useful or affordable this has become.

Unfortunately all good times come to an end and, in New Zealand’s case, public disaffection with continued restrictions and a reluctance to socialise have coincided with higher inflation and global disruption from Russia’s invasion of Ukraine. In spite of full employment and some sectors, including agriculture, continuing to perform reasonably well, there are signs the mood of the economy may be about to turn darker.

The Reserve Bank’s original responsibility to minimise inflation has clashed with its Grant Robertson imposed duty to maintain full employment, proving these are incompatible objectives. It has kept the money supply too loose and raised interest rates too late and too slowly, when a short, sharp jolt might have been advisable.

The government of course claims inflation is caused by external factors over which it has no control which is only partly true. Robertson as Finance Minister has presided over the biggest ever peace-time increase of government control of the economy, justified as a necessary response to the pandemic. The problems here are the pandemic isn’t yet over, the economy is only firing on two cylinders and the debt will need to be repaid or extended at a time when the cost of money is going up.

Government policies, such as regular increases in the minimum wage, Fair Pay Agreements, immigration restrictions in essential workforce areas, and the proposed unemployment insurance will add to the inflationary pressures from higher commodity and oil prices, freight costs and input prices. For farmers the labour shortages and rising cost of farm inputs, notably fertiliser, on top of all the red tape from farm audits, and the need to measure their farm emissions performance must be nigh on intolerable. No wonder there appears to be some reluctance to accept the HWEN farm-level measurement proposal simply because of the extra work involved.

The pandemic arrived hard on the heels of the government policy to restrict the number of immigrants which was an ideological decision designed to ensure the available jobs were filled by New Zealanders. It resulted in qualified workers in many fields, notably healthcare, hospitality and the rural sector, not gaining visa extensions or having their residency applications rejected and unsurprisingly not enough New Zealanders are able or willing to compensate for the shortfall. The net result four years down the track is a worker crisis with vacancies for 3000 nurses across the DHBs, 3000 construction workers, 2000 in the meat industry and 1000 aged-care nurses. Nearly three quarters of firms surveyed report difficulty in finding skilled workers and half say the labour shortage is hindering their expansion. Regardless of Covid this is an employment policy and immigration planning disaster, however one views it.

Our government is also at risk of falling victim to the belief that it is more important to commit to unachievable environmental and climate change goals than be able to produce food more efficiently than our international trading competitors. But at least it has finally recognised the folly of providing carte blanche approval for the permanent planting of exotics at the expense of productive pastoral land; and it is still prepared to work with the rural sector to reach a mutually acceptable, if not entirely satisfactory, outcome for reducing farm emissions.

Hopefully this will enable New Zealand to avoid the same fate as the UK, described in a recent Telegraph article in which Scottish farmer Jamie Blackett wrote, ‘when it (Department for Environment, Food and Rural Affairs) has not been obsessing over exaggerated fears about methane, it has been placating environmentalists by setting politically correct targets for “rewilding”. These days, food production is no longer even identified in the department’s strategic utterances as a “public good” to be delivered by British farmers.’

The UK is now only 55% self-sufficient in food and is at risk from the shortage of grain, as a consequence of the war in Ukraine; it is also a large importer of fertiliser including potash and nitrogen, previously supplied by Russia, for which prices are at an all time high. Unsurprisingly Blackett said a number of British farmers are changing to less intensive farming models or planting trees.

It is time for the New Zealand government to pull back from policies of doubtful benefit to which it has committed large sums of money in principle – light rail to Auckland airport, Three Waters, restructure of the health sector, merger of TVNZ and RNZ, although hopefully not trying to set up a state-owned grocery retailer - and instead focus on balancing the books while directing expenditure to essential infrastructure.

Current schedule and saleyard prices are available in the right-hand menu of the Rural section of this website.