Allan Barber warns livestock farmers to be ready for both a trade and economic shock when the artificial US expansion faces its natural reckoning from its unsustainable and unnatural juicing. It could be dangerous

The UK Telegraph’s International Business Editor, Ambrose Evans Pritchard, assesses the American economy to be at risk of a massive bubble by the end of this year, writing “all the levers of economic stimulus are pushed to the maximum which sets the conditions for torrid overheating and an unstable boom. “

The factors influencing this are bank deregulation, credit expansion, lower interest rates, a weakening US dollar and quantitative easing, further exacerbated by Trump’s US$2000 tariff dividend to each American before the mid-term elections.

As Pritchard says, this is either a courageous experiment in running the economy hot or an insane mix of the worst policies since the 1970s, when my namesake Anthony Barber who was UK Chancellor of the Exchequer engineered a huge boom with corporate tax cuts. The boom lasted 18 months to be followed by a horrendous bout of ‘stagflation’ or runaway inflation without growth, the worst of all worlds.

On a much smaller scale this scenario bears a strong similarity to the decisions of the Labour/NZ First coalition in 2020 to encourage lower interest rates, a loosening of credit restrictions and printing money by the Reserve Bank, otherwise known as quantitative easing. To be fair these decisions were driven by a desire to save businesses and jobs threatened by the pandemic. But these conditions went on far too long.

But it is hard to argue with the result over the last four years: stubborn inflation and minimal growth, an economic state of affairs that appears perilously close to ‘stagflation.’  An enquiry into the Reserve Bank is totally justified by New Zealand’s mediocre performance since Covid, although delaying it for nearly three years seems bizarre.

A prompt enquiry in 2024 may well have been more beneficial to the present government than leaving it so close to the next election. By then the public’s ability to link the Reserve Bank’s, and by implication the Labour/NZ First coalition’s, actions and decision making to the state of the economy will have faded. The healthy position of both those parties in the opinion polls suggests the public is no longer interested in blaming them for the recession which is incredible, considering the damage their policies wrought.

Meanwhile the agriculture sector continues to bolster New Zealand’s export earnings. MPI’s Situation and Outlook Report forecasts growth in exports of all commodities except seafood for 2025/26. The forecast is for a 3% increase in value to $62 billion with greater volumes of dairy, forestry and horticultural products and higher value of meat exports.

The dairy price was forecast to fall because of higher volumes chasing lower demand but the latest online auctions farmer have posted an increase after several lower results. Time will tell how sustainable this uptick proves to be.

In calendar year 2025 meat exports rose 19% to $11.7 billion and are expected to reach $13.2 billion for the June year, based on higher demand from all the main markets. The United States took 17% more product, up to $3.2 billion despite the tariffs, while China was relatively flat at $2.5 billion, followed by the EU, 42% higher at $1.8 billion. Exports to the UK went up 64% and Canada 52%.

In total the five main markets bought $9 billion, equivalent to more than three quarters of all exports. There were some standout performances within these markets – the value of beef sales to the UK rose by 378% which is entirely attributable to the NZ/UK FTA, while sales of frozen sheepmeat to Saudi Arabia almost reached $100 million. Lamb sales to the EU, the most valuable market, rose by 50% mainly because of a shortage of domestic lamb which was 3.4% lower than the previous year.  

The unpredictability of global affairs makes it almost impossible to predict what will happen beyond later this year, but if the US economy continues at its present rate, the New Zealand economy and our exports should perform positively.

One cloud on the horizon for New Zealand’s American beef exports is Trump’s decision to lift Argentina’s tariff free quota from 20,000 to 100,00 tonnes, specifically to enable supplies of lean beef trimmings to ensure “affordable beef for the American consumer.” This move will cut directly across our most important beef market.

Furthermore if the dire predictions of an overheated US economy turn out to be correct, we need to brace ourselves for a challenging economic and geopolitical environment. Farmers will hopefully benefit from at least one more year of strong demand but I’m not sure either prospective government will have an easy three year term up to 2029.