Farmers have turned pessimistic according to Fed Farmers' Bruce Wills and he wonders why politicians continue to 'redistribute' money we clearly don't have

Farmers have turned pessimistic according to Fed Farmers' Bruce Wills and he wonders why politicians continue to 'redistribute' money we clearly don't have

By Bruce Wills

In 12-months you could say we have gone from farming forward to farming bears, such was the sentiment in Federated Farmers new season Farm Confidence survey.

While agriculture will generate $21.7 billion in revenue over 2012, more than half, $11.9 billion, will go on the goods and services farmers consume.

Much of this intermediate consumption is spent locally on everything from number eight wire to builders and injects billions into the provincial economy’s heart.

Being intermediate consumption, it does not include the wage bill for 151,000 primary workers, interest or taxes either.

Hopefully, it shows you how porous revenue at the farm gate is and how easily, it radiates outwards to the cities.

With bears now running around our farms, farmers will be eyeballing every single dollar they spend. It means less will be spent on-farm meaning less spent in the provinces and ultimately, less spent in the cities too.

Yes we had a massive uplift in production thanks to goldilocks weather conditions but New Zealand wasn’t unique.

When you add in a painfully high dollar and sliding commodity prices, primary sector export revenue actually fell 2.4 percent in March 2012, when compared to March 2011.

With the European sovereign debt crisis playing nightly and with other economies shuffling sideways, we always expected farmer sentiment would turn bearish. What we didn’t expect was it to come in grizzly bear proportions.

The $64,000 question is whether China can keep growing and with it, demand for our goods.

The positive news is that primary exports now represent 71 percent of New Zealand’s entire merchandise exports. Everyone has to eat.

The bad news for other exporters is that Australia happens to be our biggest customer and is starting to look less lucky of late.

If we can ride out a rough season ahead and the weather plays ball, we look fairly good strategically.

Perhaps the magic recipe for economic growth is ‘just add water’.

The polar bear in the room becomes a high Kiwi dollar and we can’t blame the Reserve Bank’s monetary policy. It won’t stop plenty out there wanting to hack it to pieces but the major culprit sits in Wellington and is called the Government.

In June 2008, net government debt stood at $10 billion but as politicians from the Clark Government to the current Government tried to smooth the rough edges of recession, it has ballooned out to $50 billion.

That’s not all because government borrowing will peak at $70 billion in around 2014.

Since 2008 our Government has been borrowing $317 every second or $27.3 million every single day. In the space of a lunch hour, ‘NZ Inc’ becomes $1.4 million more indebted.

It is the looseness of fiscal policy that is putting pressure on the Kiwi dollar making life damn hard for all exporters.

You’d expect the Opposition would be rallying against an obscene level of borrowing. Goodness knows the Opposition has accused farmers of farming for capital gain and have used this as an argument for a capital gains tax. As a farmer and as a former banker, I shake my head that every cent of farm debt, all $47.9 billion of it, will be eclipsed by government borrowing in well less than six years.

While Bernard Hickey has been righty critical of farm debt, it has generally earned ‘NZ Inc’ some export dollars.

Not so this mass of government spending as I struggle to figure out where it has all gone, but gone it has.

You’d expect the Opposition would zero in on this spend fest as a tool to push their credentials as more responsible economic managers. Instead, Labour seems to be partying like its 1999. ‘Mondayising’ ANZAC Day and Waitangi Day could cost the economy $200 million each time it falls on a weekend. Extending paid parental leave, another Labour Bill, could add up to half a billion dollars over the next three to four years according to the Government.

Given Government is borrowing $19,000 every minute, these policies seem uncomfortably like ‘nice to haves’.

In an age where there’s competition to spend money like it is going out of fashion, isn’t it time for someone to say ‘hang on a minute, mate, can’t we save some money?’

That is the position many farmers are now in as they reconcile increasing production while cutting on-farm costs. It would be nice for a change if our politicians agreed less, is in fact, more.

Doing that creates added opportunities for those well outside our farm gates too.

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Bruce Wills is the President of Federated Farmers. You can contact him here »

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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Not so this mass of government spending as I struggle to figure out where it has all gone, but gone it has.
 
Wonder no longer Bruce, it went on an illusion called the welfare state.
 
(That was an interesting Country Calender on you a couple of weeks ago).

"The bad news for other exporters is that Australia happens to be our biggest customer and is starting to look less lucky of late."
Australians are still finding lots of reasons to celebrate.
Japan’s post-tsunami energy plan has LNG producers jumping for joy
http://blogs.terrapinn.com/pipeline/2012/07/26/japans-post-tsunami-energy-plan-lng-producers-jumping-joy/
The country's seven other LNG projects under way today total a stunning $170 billion worth of development.
http://www.arcticgas.gov/australia-makes-bold-move-lng-supplier
 
Australia moves quickly with its developments and welcomes foreign investment where as with New Zealand its often the opposite. 
The most important difference is that Australians know how to dream big where as we don't even know what we are missing out on, partly due to believing all the negative sentiments concerning China. Negativity is a giant dream killer.

Dream! Is that all it takes to not be exploited by foreign investors be they Chinese or any other with money? Is that what those successful developing economies in Africa, the Pacific Islands and parts of Latin America do..dream?

Who said anything about being exploited?

All the LNG projects are either in WA or NT. Because of State Federalism, the rest of Australia sees nothing of that. The project costs are all overseas investments. There are currently $450 billion of project propposals in the pipeline. The only benefit to Australia are the royalties on extraction and the employment paid in wages. The rest is siphoned off in profits by the o/s principals. When the Australian Bureau of Statistics publishes it's GDP figures those data are massively inflated by the "capital investment" component which is all imported. Not as rosy as it appears.

OMV has had a good year and a lot of that money is ending up in Government coffers..
 
And the company has been a significant money-spinner for the Crown coffers. OMV paid $126m in income tax in the past year, as well as royalties on oil and gas production of almost $82m. So the Government has earned about $208m from OMV in the past year alone.
"We've paid $596m in taxes and royalties since Maari began producing in 2009," Zeilinger said.
http://www.stuff.co.nz/business/industries/7327034/OMV-pushes-NZ-profit-up-by-43m
I assume there are similar benefits occuring in Oz.

" You'd expect the opposition would be rallying against an obscene level of borrowing . "
 
...... Bruce , it was them who instilled all the seriously dopey vote bribing policies , which National have now embraced as their own ......
 
Do you , in all seriousness , expect Labour to rail against WFF & interest-free student loans ?
 
...... plus all the other social welfare stuff which they adore . The billion dollars spent annually on rental supplements , for example . And propping up nationalised industries , such as KiwiRail & AirNZ .
 
The first political party to embrace austerity , and to re-dress the economic balance in NZ , will be the last one the electorate will vote for ! .. Until an economic crisis hits , we will continue to live beyond our means .

Govt debt/Farm Debt - Same but different:
However the both have been build up against:
The positive news is that primary exports now represent 71 percent of New Zealand’s entire merchandise exports. Everyone has to eat.
This is not positive news, primary exports are subject to "commodity price cycles", the downward dips pushed further by the supermarkets as we see at the present. And the current run of adds claiming supers to be the peoples friend :( ahhh.
 
We don't buy the: While Bernard Hickey has been righty critical of farm debt, it has generally earned ‘NZ Inc’ some export dollars.
That doesn't "make it better".
Think of these guys:
http://www.nzfarmersweekly.co.nz/article/9360.html
Synlait Ltd has failed in its bid to sell up to 70% of its holding in Synlait Farms.
some export dollars seem not enough to account for the debt there is now
 
But then do we include in NZ Inc the agri-lending banks. But its difficut to see where their farm-lending credit growth is going to come from this year (esp. the bit that flows into GDP).
 
A question might be:
A. Who is in NZ Inc.
B. Who is not in NZ Inc.
 

Since 2008 our Government has been borrowing $317 every second or $27.3 million every single day.
 
Bruce I think you are being a bit too kind on the government because every man, woman and child in this country has been responsible for another ~$10.00 of new debt and debt service costs everyday since the end of November 2008 up to the end of June 2012.
 
Net New Debt issued by the National Government between Dec 2008 to June 2012 inclusive: $ 43.636 billion.
((43.636/1307.92days)*1,000,000,000)) = ~$33,362,981.83
 
Daily Accrued Interest Bill on outstanding Government debt:: ~$10,704,483.62
 
Total = 44,067,465.45/4,434,049 population  = ~$9.9384
 
The addition of private liabilities on a per capita basis must clealy spell out unsustainable ponzi finance - we have to borrow to pay that which falls due today.
 
The country just cannot earn enough as the economy is currently structured - when will the clowns admit as much and take the necessary steps to rectify the situation?
 
Caveats:
The population today is higher than Dec 2008,  just as the daily accrued interest would be lower - but probably cancel each other out.
 
I have no definitive proof of the offsetting investments against this bald structure of genuinely stated public debt as published by the NZDMO. The Net Debt figure remains elusive because there is a failure to present clearly defined income earning assets/loans (derivatives included) in the government books.
 
Arithmetic errors excepted.
 

Stephen Hulme: It amounts to a "Situation Normal" in mushroom country. No different to the efforts of the US Congress trying to get legropes around the tentacles of the Federal Reserve and have it audited, albeit on a "Top Secret" for "Eyes Only" basis.
 
As for the locals, how many of 4.4 million kiwi "people in the street" would begin to understand derivatives and swaps etc .. your off-the-cuff, knee-jerk, best-guess? Do you think they want to know?

No - but anybody who thinks they are worth more than the minimun wage believes in miracles and wishes to steal from the rest.

On minimum wage are we?

Petty and useless remark, and from what I have seen from previous posts wildly off the mark. He is one of the handful of really clever ones on these forums. But the greatest quality Stephen seems to possess is that he isn't self centered.

robby217 is entitled to his opinion . ....
 
... he's not the only one who disagrees with some of Stephen Hulme's views ...... I do not think SH is as clever as you believe he is , nor as un-self centred .......but , so what !
 
We're all free to express our thoughts here @ interest.co.nz ......

Just as well you added in "thoughts", because it isn't opinion he expressed. Actually it is an unnecessary, underhand and irrelevant personal attack that adds no value to the discussion, which is my main point that the normally perceptive Gummy missed. An attempt at creating a fallicious argument, but I suspect SH is above bothering to engage it.

That wasnt an opinion but a sarcy attack...
I see nothing where robo disagrees with Stephen's views or a justification of such...In terms of cleverness SH certainly stands head and shoulders above more than a few.
regards

@ scarfie - thank you for coming forward in my defence.
 
Unfortunately, nothing can be satisfied engaging ad hominem attacks hurled by hidden heroes. 

..... " anybody who thinks they are worth more than the minimum wage believes in miracles and wishes to steal from the rest " .......
 
Dude , usually I'm left speechless at the pure unadulterated drivel that PDK & steven spout , but today , you take the cake !
 
..... that is the biggest load of bollocks on this site , this weekend
 
Gold Medal , me old son .. . Bravo !

"Dude , usually I'm left speechless at the pure unadulterated drivel that PDK & steven spout , but today , you take the cake !"
 
Party on GBH!! Dow to 20,000 by the end of the year!!!!

.... you're more bullish than me , buddy ..... I only predicited the DOW to reach 15 000 by the end of the year ...
 
Good to have another " glass is half full " guy on this site !
 
20 000 you reckon ?

Mate, you're being wayyyy too pessimistic! Wallstreet journal and forbes told me the USA is now an oil exporter and manufacturing is about to boom! Dow to 20,000, US GDP growth 5-7% at least!!! ;-) You better get in quick and invest before things really take off!

Extrapolate forward 10 to 20 years , and you'll probably be correct , that the US will be a net energy exporter .......
 
..... and with abundant supplies of cheap oil & natural gas , US manufacturing may be competitive with Asian industries once again  ......

Ah - a(nother) GBF foot-in mouth moment.
 
Just linked energy supply to economic activity.
 
Bugger, eh? Linked to a finite resource. Only variable: time.
 
And every other thought empirically piled atop that false foundation.
 
 

Sure thing PDF .... whatever you say !

Your ability to make a complete fool of yourself is it seems like your belief in for ever growing....without limits.
At one stage I sort of thought I'd feel sorry for you when this blows and you are wiped out, but I can see you are determined against all sense to keep on trucking.....
regards

GBH - What "glass half full" is actually permitted on this site - I'm staying then. Unfortunately many of the current doomsters, of which I've been one since the mid-2000's, are typical of those who awaken late, and the shock has them expecting mankind to be wiped out within months/years. The saying that its never as ends up as good as the biggest bulls expect, or as bad as the biggest bears expect, is always true. Now as compare with pre-2007/08, everyone is aware of the problem, there are no surprises other than how it will play out. But there will be opportunities for those smart enough, and prepared enough, for what's to come.... a big part of that will be not to make assumptions about how it will play out, stay flexible and positive  

Surprises don't have to be on the downside , lest we forget .  .. And yet Taleb's " Black Swans " are always presumed to be negative .......
 
.. .. why ? ...... Why can't wonderful " Black Swan " events occur ?
 
Sure , the gloomsters have had a field day since the GFC impacted ... and in their short term memory , and lineal thinking , things can only get worse ...... not stay the same , nor get better ...
 
.... in the last 3 - 4 months several extraordinary medical breakthroughs have been announced , each of which stands to improve the quality of life of many millions of people around the globe ..... do you know of any of  them ? ...... you're forgiven if you don't , 'cos the media tend to headline the crappy stuff happening around the world , not the terrific stuff . In the media , crap sells !

Gummy...
You hang in there...here.
The 'moaning minnies' proliferate on interest.co.nz but the economy won't be bad forever. 
Interest.co.nz is a gloomster's paradise. It needs people like you to remind others there is always a new day coming.
I only visit here occasionally, to get a good laugh from the 'gum nashers'. You keep winding 'em up though. I am sure most of 'em are lowly paid employees of big companies.
All the best to you.

Cheers , mate .
 
.... actually , I'm gonna lay low for the next 2 weeks .......totally  love the Olympic Games  ....... unless it's cancelled because of peak oil !
 
Aha ha ha de haaaaaaaaa !

Technology is a wonderful thing isn't it Gummy. Now they have greater ability to test for drug cheats than ever, with substances they could not screen for earlier now being possible. They even keep the blood samples from previous medalists I hear, and now they are checking back with this new tech and uncovering that a lot of them were cheats. 
 

Yeah , but sometimes , like when you've got a group of 4 " green & gold "  braggards wandering around the swimming pool  , calling themselves the " Weapons of Mass Destruction " ..... claiming the gold is already their's ....... and that they'll take the world record too ....
 
...... but in the final they only come in fourth ....... well you can't drug test them , can you ...
 
Not from sympathy of course , but because your hands are shaking too much from laughter to hold a needle or a specimen bottle ...... haha ha haaaaaaaa , cobberdiggermate !

acusing others of linear, thats so funny coming from you....
Interesting though that you do read what some are saying....even if you fail to apply it anywhere near properly.
regards

Hello , moaning Minnie : How goes it in the subterranean bunker ...... got enough candles ?
regards

wrong as ever GBH.
regards

We can recycle Bernard Hickey's ear wax , and make you some natty brown candles for the long nights in your cave ......
regards

This article really is a bit of a mess. It is all over the place.
This bit was enjoyable:
Mondayising’ ANZAC Day and Waitangi Day could cost the economy $200 million each time it falls on a weekend.
Sounds a little high to me. It kind of misunderstands how economies work. Economies are not households or even farms. One persons holiday really is another personslivelyhood. One persons spending is another persons income. When governments spend, nearly all of it gets spent locally and the companies and individuals who get that spending also spend it locally. One persons welfare cheque is another persons rental property mortgage payment.
The high dollar and our crazy private debt are the real issue. They are the indicators that tell us that we are not a Sovereign nation at all. There must be a name for what we have allowed ourselves to become but I am not sure what it is. A serf state maybe?
 

This article is amusing....a very wealthy farmer whose success is mainly due to a tax free inheritance complaining that Govt spending is too high.

Possibly wealthy on paper, but farmers have been as guilty as urban speculators, by leveraging percieved wealth on capital gain. This concerns Bruce, he was flagging the disconnect between land values and productive worth back in 2006 I believe.
My concern is the role foreign investment plays in this situation. Kiwi above says we should embrace foreign investment and dream. People in countries that have embraced foreign investment such as Africa, parts of the Pacific and Latin America dream of a better life. I wonder how foreign investment is helping realise their dreams, through purchasing and exploiting their natural resources?
 

Wealth on paper?? Not sure what you mean as a farm can be liquidated...the point I was implying is that inheritance has a very distortionary effect on capitalism...here is a wealthy farmer complaining about Govt handouts, when he's received (or will) a huge handout from his old man.

Ricardo you are entirely missing the point.  From the Prime Minister right down through nearly every area of society someone is inheriting some form of free payment or service at the expence of the few who generate the income in the first place.
 
There is a distortionary effect on Capitalism and that effect is the Capitalist who earnt the money cannot reinvest it to make more money which provides more jobs and a higher standard of living to all.
 
What is the difference between a farmer helping out the next generation if he can afford to over someone receiving State assistance?   What's good enough for the goose is obviously not good enough for the Gander in your world.

WTF,  'Africa, parts of the Pacific and Latin America' are all countrys run by corrupt leaders despots and administrations, none of which we are!.....unless of course Labour gets back in to govt!!

Thank the lord for National and friends, our only hope against corruption. MIST 42, I don't understand what you are talking about, but it's not the first time.

That's a big call Omnologo- were you just feeling tired and emotional or do you wish to put names to paper and really state what you mean. The corrupted followed by their National Party redeemers is ok with me.

What I really mean is, is it worth having a debate on the role of foreign investment. For example farm land. If New Zealanders can produce products from exploiting the natural resources available, and selling those products for export reciepts, what role does foreign investment play?

what role does foreign investment play
 
The credit side of the current A/C deficit balance sheet.  

And exporting water and sunshine via milk, meat etc is a good way to finance that credit?

Yes, but others imports overwhelm best export efforts and have done over the long run - hence the need for foreign credit in the form of asset purchases and loans to banks to create mortgages. 

Oh come on, labour corrupt? no more than National....despots? cant see it.
regards

Ricardo - Where do you get the tax free inheritance from???? 

Ricardo -  A little email I received sometime ago for you to read. Maybe you will understand why Govt spending shouldn't continue anywhere near its current levels and stripping income from those who earn it and transfer it to another just plain old doesn't work.
An economics professor at a local college made a statement that he had never failed a single student before, but had once failed an entire class.

That class had insisted that Obama's socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, "OK, we will have an experiment in this class on Obama's plan".

All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A..

After the first test, the grades were averaged and everyone got a B. 
The students who studied hard were upset and the students who studied little were happy. 

As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little. 
The second test average was a D!

No one was happy.

When the 3rd test rolled around, the average was an F.

The scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else. 

All failed, to their great surprise, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great but when government takes all the reward away, no one will try or want to succeed.

Could not be any simpler than that.

except its a total load of crap....the lecturer should be dismissed.
regards

I think it was an attempt at humor Steven. 

You know Adam Smith did make an argument for markets, and the argument was that under conditions of perfect liberty, markets would lead to perfect equality. This is actually the kind of society he was advocating in Wealth of Nations, one of perfect equality. It happened that he thought this would be reached by having a free-market. You can decide for yourself if that happens in practise, but should not simply ignore away the moral part of his thesis as if it was amoral, in fact the thesis wasn't. So it turns out that this (made up) example is completely correct, if the goal is equality then 'socialism' works.
Of course one should be very sceptical about assuming the behaviour of a bunch of students in a made up scenario, e.g some people still go to university to learn something, despite what economics professors might believe they are there to do.
 
 

The trouble is eqality as it means different things to different people. My own personal view on equality is that we have an equal footing in regards to race, age, gender etc written in the Universal Declaration of Human Rights and in NZBORA. (It is interesting that NZBORA does not protect the property rights of people).
 
So if we are all treated equally in regards to the above things then it is our efforts that determine our success or failure. Many people fail to recognise that their own personal effort is still required and scream the system doesn't have equality because e.g.someone is wealthy and they aren't.  We then travel down the rediculous path of compulsory redistrubution to create this new form of so-called equality which fails all participants.
 
We have all witnessed the GFC and the effects of the over-leveraged banks, we have the same problems within our Governments framework of spending. And I shouldn't have to explain what happens when Govt over-leverages the tax payers. Each of us as individuals has to balance our income to spending ratios while looking at the value of our assets and yet many fail to recognise that Governments also have the same responsibility.  Groups of people then establish to obtain recognition for their particular cause and lobby Governments to provide (usually) funding which then creates more distortions and anomolies.
 
 
 
 
 
 
 
 
 
 

No, in fact Adam Smith was talking about equality of wealth. (Its an odd decision to ignore this meaning of equality in the first paragraph, and then to address it in the second). Thats why he is considered the father of economic thought.
Fortunately we don't have to rely on Adam Smiths limited interpretation of a vastly different economy when determining how to structure a modern economy. But maybe we shouldn't forget his moral ideals when doing so.
Apparantly you failed to comprehend my previous comment in fact, because when you say
We then travel down the rediculous path of compulsory redistrubution to create this new form of so-called equality which fails all participants.
This is exactly the fact that the 'professors' example shows. When the goal is equality then re-distribution works, the only problem (if we assume for second such events occured) is that the professor was so blinkered that he failed to interpret the results, he also failed the class but that was his decision of course.
Also, I am yet to see how you think progressive taxation is failing the country, since income taxation is presently at an all time low, and the economy has become less stable in rough correlation, and income inequality has widened in an even stronger correlation, it appears that moving away from this policy is in fact causing the economy as a whole to malfunction further.
 
 

Nic the NZer - the whole taxation system is failing the country.  While Income tax maybe presently at an all time low, other forms of taxation are running out of control.  The true cost of taxation is distorted. If the Govt only had one tax and that tax was called income tax it would not be as you say at an all time low in fact I would suggest it would be well over the 50% threshhold and probably more likely to be in the 60% area.  This is why the economy has become less stable and spending power has reduced.
 
My point in placing the Economics Professor article in here was to highlight the fact that when Government fails to recognise the contribution that the productive people make to the economy that the productive people stop trying so hard (especially when productive people are an employee) and the whole economy gets hit. 
 
The rewards have to be better for the risk and hard work involved. Why do you think the young and bright are leaving the country the reward is not here for them. 
 
 

Taxation isnt the issue.  You assume that its the monetary reward is the be all and end all, given your posts show your outlook though that isnt surprising. 
So NZ is simply too small in many respects this means,
1) There isnt the degree of job specialisation possible and hence non-monetary rewards, enjoyment, challenge, advancement.
2) As was pointed out in a TED talk its population, so you can never catch up in terms of $s and changing tax take simply doesnt matter. 
3) You equate productive with working hard and/or well paid, this isnt the case.
4) Our over-priced hosuing market is a disgrace, this is down to non-productive specualtion, much of it due to not having a CGT and poor regulation to protect investors.
5) Too small equals too few "bright lights" aka the likes of London, the young always want to go and look....some will come back, some will not.
regards
 
 
 

Steven -
Taxation is an issue - I think I have more than covered this in previous posts.  You obviously aren't aware of all the hidden taxes, levies etc or perhaps you don't mind that some people are heavily subsidised. I have noted your previous comments on rates.  So while you pay your measly $1500 to $2000 in the city in rates, do you think that is what farmers are paying also? Well they are contributing thousands and thousands but then you'd think that was acceptable as I get the picture you don't object to being subsidised.
 
And Whao-up buddy your horse just bolted and the girth is loose on your saddle and your rolling around the horses barrel,  I do not assume monetary reward is the be all and end all its a form of exchange.  Money is like everything else in life it needs to be well looked after and this is my responsibility no-one elses.  I dislike when the Government enforces compulsory aquisition via taxes and then simply squanders this money.  It tells me they don't have the nous to be using it wisely and simply do not appreciate money and the good it can do if used correctly.  Far too many people are in on this scam and it is time it ceased.
 
If your worried about the over-priced housing market I can tell you now CGT wont sort the problem.  In fact you should probably read more on what Hugh Pavletich writes as releasing more land for housing will have a far greater impact when there is a supply shortage.
I don't thing you understand how the Councils operate. They have this large investment in infrastructure and they basically want to see all sections filled within the defined areas as the more users in a defined area assists them. 
 
The RMA also significantly impacts on housing costs and business.  How many people are sucking a living off this BS? A simple law could have been passed to stop people emitting harmful crap into the air, water and soil and with some simple monitoring could have been undertaken on a regular basis by the Councils and penalties imposed if necessary.   The Councils District plans idenitfy which land is be used for what and that severely impacts upon land being released for housing.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

It seems many have missed a very good point.
"Agriculture will generate $21.7 billion in revenue over 2012"  with total agriculture debt of 47.9 billion.
 
It's certainly not agriculture that's bleeding the country dry. 
 
 
 
 
 

Yet for all that revenue apparantly it pays virtually no tax....
in which case if its not "profitable" why are ppl doing it?
If it is profitable (and Im sure it is) why isnt it paying its fair share of tax
Why is it neither party seems willing or able to tackle this?
regards
 

"Virtually no tax"  I hope you are wrong Steven. But with the horrible losses many of the corporates seem to make perhaps you are right...after all they can be carried forward for a while and dripped out.
You ask why... why do it. If we talk dairy, gosh its a great job if you are the boss. You have the 4wd and the machinery to play with. You have the hairies to milk for you. They all take a hell of a pay packet, get the free house and meat. Plenty of time for the kids.
Sheep and beef is different, I think freedom is the word there. Most are their own bosses, no staff worries (although the dogs can give a lot of bother), no traffic, no noise....many of those out in the wops like me, just can not handle the noise of town. So what if you dont make much dinero, at least you run your own life.
And it isnt profitable cause too many of us want this life, and there isnt enough land to go round so we bid it up to ridiculous levels. 

My limited understanding is the current idea of farming is to load up with debt which is tax deductable and grow the business and cash out tax free on retirement.....hardly the intention of the system.  I also dont believe corporates make losses....not genuine ones all of the time, its tax avoidence.
What that really means is the little ppl pay too much of the burden.....
regards
 

At present Steven you will be pleased to know that banks are asking for some of that debt back. When you pay back debt, that money is taxable. Govt will be getting some of that tax out of those farmers now.

Not pleased on an individual basis.
The point is there are perfectly "legit" reasons to take on debt for truely productive reasons.....where I take exception is where the debt is purely or substantially taken on the avoid tax.
Im sort of pleased as less debt means less risk, it should make NZ more resiliant....(I hope).
regards
 

Steven - it pays tax and loads of it. Work out the GST the Govt is getting out of it for a kick off.
Then there is all the hidden taxes that Agriculture has to pay.  Farmers also pay a high proportion of fuel taxes which ends up being spent on the National Roading Network while the rural communities frequently have poor roads. The reason many farmers only break even on an annual basis is all the damn compliance costs, dollar fluctuations, weather conditions, Govt Policies, interest rates etc.  It costs more to live in rural areas and the services are often crappy or in many instances non-existant.
All personal income the farmer pays himself is taxed just the same as anyone else.
If a farm runs a profit for the year, it pays tax, if the farmer takes wages he pays tax on them,  And then of course there is the livestock tax. There is a plethora of compulsory levies within each agriculture sector which are deducted at source.
Farmers pay huge amounts in rates which is just another tax and that helps subsidise all the city and town people's services like Stadiums, art galleries, museums, libraries, sports parks etc.
Yes the farm if you keep it long enough will go up in value slowly and this has not been taxed if the farmer sells. This value increase applies across all asset classes including residential property not being taxed on the assets increase in valuation. If you trade or develop farms you will pay tax on that income the same as those who develop other property types.
 
There are far too many people in NZ who seem to think the pasture is greener on the side of the fence and portray farmers as someone who is creaming it on the tax front when they sell and therefore not paying their fair share. 
If you are going to tax farmers or business on the increase in value they have obtained then everyone should have to contribute, even homeowners. 
Some political parties are advocating a CGT as a vote buying exercise and this should be seen for exactly what it is, it's division of the people who make up the population of the country and puts one group against another. Is this the sort of Political leaders we wish to represent us in Parliament? Religion is one such example that has used this strategy for centuries. 
We all want a wonderful, prosperous, healthy, educated nation but when people divide into political groups they perhaps miss the opportunity to obtain any true benefits.
We end up with a group who usurps all value from others.  There are those who are enforced to give and those who think it is their right to take without any effort required.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

There have been more than a few comments that for the 21billion in "revenue" generated little corporate tax is paid and indeed farmers get WFF all with great accountants.
"usurp" exactly, sure lets have the debate on what the real truth is and not that from a  philisophical point you think they pay enough...
A CGT is done in most other countries, its no more divising there than it would be here. In fact arguably if everyone is paying a fair share then no one group, say PAYE have a justifiable reason to be upset.
The point on taxing an increase in value is its a profit....an OAP is taxed on their gains, why shouldnt a farmer be equally taxed? I certainly fail to see why not.
regards

Steven - there is a lot of misunderstanding and ignorance by some commentators on this site. To say that "$21 billion in revenue generated little corporate tax" proves the lack of understanding and ignorance.  The cost of production hasn't been deducted and farming has extremely high costs associated with direct production. 
 
Your comments on CGT tell me that you do not understand the current tax system very well nor do you understand how CGT works in many other countries.
If you introduced a CGT and the valuations kept rising the Government has win situation but how would you treat this situation if valuations declined. Wouldn't a CGT have to provide a refund as well. This has happened in countries that have a CGT and has been extremely costly where valuations have fallen. 
A CGT is taxing a valution on income that has not been "realised".  This is not a profit as the goods have not been sold and may never be sold.
 
PAYE are not the only contributors to the total tax base but as most people pay this tax this is the one that they best understand.   However the understanding is frequently from a limited perspective of the amount they pay in each pay period. If you want a fair system of taxation you would have one tax called a flat tax that everyone had to pay. Once you've paid your taxes for the year the rest is yours. But hey there's too many people getting a suck on this cherry for fairness to come into play.
 
 
 
 
 
 
 
 
 
 
 
 
 

There was report here in interest.co.nz about 6 months ago quoting IRD statistics that the Dairying Industry paid a total of $200 million in taxation last year, while Fonterra received a tax credit of $400 million in the same year. Net total for the industry zero. As to all the GST on costs paid by farmers, that is deductible from the GST owing on milk supplies to Fonterra, which in turn receives most of it back in the form of zero rating on exports which in turn is rebated back to the farmers in the form of payouts.

I always paid a load of tax when I farmed, except in drought years.  I asked my accountant how my friends never paid tax, it was unfair, could he perhaps  'try harder'. He said that joining my friends would not be a good long term solution unless I wanted to retire in a rented house in a farming town, in the middle of no where on the state pension, with my wife wanting to know where the money is  every bloody day..  I wrote the cheque out.

The problem is if you cash out before it blows up, then you are of course going to be well off....the "sucker" stuck with the asset is of course screwed....which in turn takes out the bank where your profits are kept "safe".
Its going to be interesting....
regards

known as the greater fool theory...
 

Iconoclast - you need to identify clearly the type of tax. $200 million in tax from dairying tells that that group of farmers had a bad year.  But that would not be the only tax they paid.
 
Fonterra could have received a tax credit for a variey of reasons.
The farmer is not the exporter (Fonterra is) zero rating only applies to the exporter. Fonterra still has to pay GST to the farmer when buying the raw product (kilograms of of milk solids). The farmer deducts his GST deductible costs off then pays the difference to the IRD in the GST return.  When payouts are referred to it is the price that Fonterra has set per kilogram of milk solids that they will pay to the farmer supplying.
 
I think you might be a bit confused on this subject.
 
 

No confusion at all. The $200 million was quoted directly from an IRD report. It could also mean a lot of dairy farmers are loaded up with debt, while a few like AndrewJ are perhaps debt free. As to Fonterra, it exists in the dairying space. All GST export clawbacks received by Fonterra simply go into the Fonterra pot and are available to be recycled back to the farmer in the form the payout. The fact remains, in the past 2 years the net TAX position of the dairy industry in toto (dairy farmers+fonterra) is zero or less than zero.

looks like less than zero coming....
 
http://www.stuff.co.nz/business/farming/7412737/Payout-forecast-down-to-...
West Coast dairy farmers are heading for tough times after a milk-payout forecast was lowered to an unflattering $5 to $5.40 a kilogram of milksolids.
For many farmers the revised payout by their co-operative, Westland Milk Products, is close to their break-even margin.
 
Westland chief executive Rod Quin said the lower payout was because international prices for dairy products had fallen 10 per cent to 15 per cent below expected levels and this was compounded by a strong dollar.
He said the latest analysis showed it might be unwise to read too much into the United States reducing its milk production to help ease an over-supplied world market.
 
Many farmers face farm costs of about 3.50/kg (we think this is $4, plus on the other side of the hill) and then another $1.50 (this seems an average - think of the "top quartile") for debt servicing which is getting too close for comfort to the forecasted payout.
But probably there or there abouts for Westland suppliers we think...
Westland appears also to be a casualty of changes to the Chinese colostrum market. This has flat-lined, chiefly from changes in China's food regulations insisting on the ingredient being removed from child nutrition formulas.
About 70 per cent of Westland farmers supply colostrum.
 

Henry_Tull - There will be some serious consequences if those farmers can't break even and if their equity is insufficient to gain important capital.  One of the few things that many in NZ don't realise is that NZ farmers are still competing against countries who have subsidies and tarrifs etc which also affects the prices NZ receives.
 
"looks like less than zero coming" - this only applies to income tax. GST and the like will still be paid.
 
Interesting to read your comments on the Chinese Colostrum supply. I would have thought the colostrum market would be relatively small given that cows only produce colostrum for about 4 days after calving.  I do know that colostrum products fetch a  high premium but it is such a small part of the overall production that I think it is more likely that international prices and the NZD are having by far the greater effect than the Chinese Colostrum market.
 
 
 
 

Hopefully one of those consequences will be a lower $NZ

Iconoclast - "All GST export clawbacks received by Fornterra simply go into the Fonterrs pot and are available to be recycled back to the farmer in the form of a payout"
 
What GST clawbacks are you talking about???  Zero rated GST means no GST is added to the transaction when the product is exported. It is not the IRD who charges the GST it is the registered business who has legal responsibility to add it on if the appropriate conditions apply to the product or service. The business then has to add up all appropriate transactions which they paid GST on and then they add up all GST on total earnings and get a refund or pay the IRD accordingly to whatever position applies.  A refund means that costs were larger than the income within that period and if you have to pay GST to the IRD the costs were less than the income from goods and service There are many rules which apply such as banking transactions do not attract GST.
 
Income for many within the agricultural industry isn't regularly spread throughout the year. For example all the costs of production of lambs goes on throughout the year and then they are sold on reaching certain weights. Or someone who produces a crop of potatoes or raspberries has all the costs throughout the year and only when the crop is harvested and sold is the income realised. The GST costs are claimed during the return period they are spent and the GST on income is paid in the return period when the income is realised.
 
 
Did the IRD report refer to Income Tax or GST specifically. These returns are filed completely independent of each other.  IncomeTax returns have completely different information requirements to GST returns. 
Farm or business debt is only considered in the annual filing of income tax and is never considered for GST. Therefore I suggest the article to which you are referring relates to the income tax only and this should not be confused with PAYE as this is separate again.
 
The amount of $200 million could also mean that many farmers over-paid their provisional taxes when estimating their incomes. If you have a drought year which I understand the figures you are quoting are from, production would have significantly declined and many farmers could have found themselves as having contributed to much in provisional tax payments to the IRD. 

notaneconomist:
 
You have put forward  a long convoluted proposition. I'll deal with the GST first. It's quite possible I'm wrong and I'm happy to stand corrected.
 
Here goes. I'll try and keep it simple.
 
EXAMPLE a non-exporter - domestic sales - GST liable
Sales of Product inclusive of GST  $230, GST component $30
Cost of inputs inclusive of GST $115, GST component $15
Net GST payable to IRD is $15
 
EXAMPLE b an Exporter - export sales - zero GST
Sales of Product with no GST  $200, GST component $0
Cost of inputs inclusive of GST $115, GST component $15
GST refund due from IRD to the exporter.
(refund, clawback, call it what you will) (exporter gets the lot back)
 
Unless things have changed dramatically, thats the situation, call it a refund or a clawback. In the case of Fonterra, the payout paid to the farmer is subject to GST. If Fonterra pay the gross amount to the farmer, then the farmer has to pay it, otherwise I suspect Fonterra, acting as agent, not principal, deducts the GST from the payout and pays it to the IRD on behalf of the farmer, and remits the net to the farmer. The $200 and 100 examples above still apply and Fonterra then gets a refund of $15 in its own right. Now it doesn't make too much sense for Fonterra to pay the farmers $15 component to the IRD one day and then request its own refund of $15 back the following day. It would most likely be contra'd off and a zero sum return sent in to the IRD. Of course Fonterra does have domestic sales which would be liable  to GST.
 
Now tell me where I'm wrong.

Iconoclast - All income derived from from the sales of Goods and services attracts GST.
 
All expenses incurred in producing Goods and services do not attract GST and I think I have pointed this out in what you termed my "long convoluted proposition".
 
For example wage costs do not attract GST yet they are a "direct cost" to production of the Goods and Services being produced for sale.  You have viewed a small piece of the picture without consideration to all the facts.  Farmers and Business are required to keep strict records, collect and pay this tax at their expense.  Farmers and Business are targeted with all records, collections and payments of all systems that are implemented by Govt and its agencies. It is these compliance costs that significantly impact upon all business.
 
It is not that many years ago that Employees were responsible for their own tax payments to the IRD. There was no GST before 1 Oct 1986 and none of the cost involved.  Employers have the sole responsibility for the collection and costs of the whole taxation system. 

Fact is GST is neither a cost nor income to GST registered entities.  It is only a cost to end consumers and those not registered.
A GST registered entity is merely a collection agent for the IRD and it is up to those entities to manage their cashflow accordingly to ensure they pass along any excess GST collected (income greater than expenses). 
 

notaneconomist:
Tried to keep it simple. Which leads to mis-interpretation. It was implied we were discussing Fonterra and exports versus non-exports and GST.
 
This discussion is about Fonterra
Fonterra is predominantly an exporter.
This discussion is therefore about export sales
Subject to clarification it is assumed the greater proportion of its sales are exported.
 
You say "all income derived from from the sales of Goods and services attracts GST"
 
Your statement is quite correct - yes all sales "attract GST"
Export sales are "zero rated" and subject to GST at 0.0%
Which means an exporter pays zero or $0 GST on it's exports
In other words that can be interpreted to mean export sales are exempt from GST
 
My mistake was to describe in the Exporter example above as GST free when in fact they are subject to $0 GST.
 
For the purposes of simplicity the Cost of Inputs also implied GST only on Cost of Goods subject to GST excluding costs such as labour, interest, depreciation.
The example still holds.
Fonterra can claim back all GST it pays on "Cost Of Goods" in relation to producing those export sales, while not paying any GST on its export sales.
 
Authority
Certain taxable supplies are taxed at the rate of 0% rather than at the standard rate of 15%.
http://www.ird.govt.nz/gst/additional-calcs/calc-spec-supplies/calc-zero/#exportedgoods

Correct. What I've been saying all along. Export Sales. Fonterra can charge what it likes to foreign buyers (if it can) but is not liable for any GST on it. Because it can "claim back" all the GST that it paid "you" for the cost of raw milk / supplies it gets a whopping big refund.
 
And yes, Fonterra would be nuts not to be registered for GST when you consider what's at stake. About $1 billion plus or minus a bit.  Remind me, how much profit did Fonterra make last year?
 

The $200 million tax was assessed Terminal Tax not Provisional Tax

Iconoclast - If a Business overpays Provisional tax an income tax refund is due.
 
If a Business has not paid enough Provisional tax throughout the year they then have to pay the extra which is called Terminal Tax.
 
It is a pity the figures released did not report how much provisional tax was paid.
 
Farming is a particularly difficult business to assess forward income as there are so many variable factors involved from weather, the NZD, overseas markets, world events like the  European fiasco, Govt Policies etc.  Farmers have no control over any of these issues and so need to be constantly rubbing their crystal ball on the breakfast table each morning.
 
Agricultural based industries like Fonterra, have all the same issues as the farmers because supply of product is dependent upon all the above mentioned events.

notaneconomist:
If it gives you any peace of mind, my resume includes a number of years working for the IRD. I understand Provisional Tax and Terminal Tax perfectly

My other favorite is no neighbours. I can walk outside and yell at the dogs to f up as loud as I like and not be embarrassed. Yelling is good for the soul.

LOL, yes...
regards

I agree with a lot of the points notaneconomist made. You must remember not everything is even, there is always give and take. I mean with our rates we get a shite metal road that has 2 water courses running through it. At the moment it is really only 4wd. I provide my own water, have my own rubbish pit. I pay for dog rego, and I never see a dog ranger. I pay environment waikato their own little separate rating tax....  not sure why but I do. I pay tax on my livestock, when I havent even sold them. There they are, costing me to keep them alive, and I have to prepay my tax on them....grrr. When I buy in livestock I have to pay gst.. now 15%, which makes the od bigger than ever before.  So for every rip off Steven sees, I can also see the reverse. There is a balance though I think.

In every business that are costs and gains. If the agricultural sector was taking in little revenue I'd accept little tax would be coming out...of course then ask why subsitute an industry not doing well........rates etc, everyome pays them...so what I'd like to be sure of is a level playing field...
I dont think farmers are in any way unique by the way...I think much of industry does exactly the same thing.
The problem is then you dont invest to make the best profit or business but to pay the least tax....I think thats loopy myself.
regards