Chamber of Commerce address
Released 24 Jul 2009
Conor English, Wellington
On one cold morning in February 1978, a 12-year-old Southland boy milked two house cows by hand, ate some porridge and bacon and eggs for breakfast and then put on his new suit. It was going to be the biggest day of his life to date. A day when he crossed the divide between the small rural town of Dipton and that great, big city of Wellington - the hub of commerce, politics and the cardigan wearing public sector.
After breakfast, he jumped on a plane in Invercargill, flew to Wellington and saw more people on the bus ride from the airport to the train station than he had seen in his whole life. The city was big and busy. He was taken to a movie - only the third in his life but the all-time classic, Star Wars - where he found chasing Darth Vader in space to be a bit different to chasing sheep in a paddock. He rode on a train for the first time and by 5pm, had meet people from all over New Zealand.
That boy was me, and that was the day I started at St Pat's, Silverstream. It was truly the biggest culture shock of my life. I would suggest that for many people in this room today, or around the city, going back to rural New Zealand may be as big a culture shock - and that's one of our first challenges.
In my view, a key motivator and driver of any society is identity. New Zealand's identity is hard wired into two key attributes - our Maori and our rural heritage. That's what makes us different from other countries. It is this reality that connects our urban and rural cousins with the world. If there is a slight disconnect, it is in of our city cousins' physical experience and understanding over what happens on our farms in a practical sense - just as it was for me when I started secondary school.
As each new generation becomes more removed from our farmers - the custodians of the land and water - the more we need to bridge this gap. The challenge for us as rural people is to build a bridge towards the cities, build a better understanding of the partialities of farming and also build a shared understanding of what this nation needs for everybody to prosper and reach their potential.
At the beginning of next year one of my sons, just as I did, will head off to secondary school. He will start his day by grabbing the milk from a plastic bottle in the fridge, sucking down an ‘Up and Go', putting his play-station away, logging off facebook and then catching the bus through the main street of a city, where there is more colour but less breadth, more buses but less cars and more Government servants but far less business and private sector servants than there was in my day.
Much has changed in the past 30 years. So what of agriculture and Wellington's future? Is Wellington destined to be a Canberra-like, one trick pony? How do agriculture and Wellington fit together? What does the new Government mean for both and how can Wellington benefit from agriculture?
The answer to these questions is that it depends. It depends on what we do as a country, the decisions we make to adapt to a world changing at a far greater speed than when I started secondary school.
The reality is New Zealand is hanging on to the cliff face of first world status by our finger tips.
If we are to climb that cliff face as a country, we need to face up to the fact that we need to produce stuff to sell to the world to maintain our standard of living. We need to invest in productive assets, productive people and productive ideas.
Yes, we do need to improve productivity, and agriculture has an excellent record of doing this - for 25 of the last 27 years, we have outstripped any other sector of the economy on this measure.
But the thing that many politicians and economists miss is that you can improve productivity by producing less. As a country, what we need to actually produce is more value, more units of production with each unit being worth more. New Zealand can't shrink itself to success. Those who support a 40 percent reduction by 2020 seem to think we can. While I am sure there are many good intentions, those involved are taking an extreme, impracticable and unhelpful position to the global environment and the future of all New Zealanders. An emission trading scheme or ETS is not like the nuclear free legislation, where many people could feel good about it but it didn't actually make any difference. An ETS, if done wrong, will have a devastating impact - but I will touch on that later.
When we look at going forward, we need to take a quick look at some bigger picture trends. There are threats and opportunities that we need to adapt to and we need to stay relevant.
Since the fall of the Berlin wall, we have seen massive geopolitical, technological, economic and social changes. For example, the phone box has basically become redundant as the web and new technologies mean a move to digital, mobile, personal and virtual systems. Supply chains and how people work together have changed with the arrival of downloading, uploading, outsourcing and off-shoring. We are seeing huge competition for peoples' time and people seeking stimulating experiences rather than just being involved in a process.
Globalisation has moved from a contest between countries and companies to one where individuals can now collaborate every day across the globe. My children play online games with children from Asia and Eastern Europe - but only after they've done their homework of course.
We are seeing structural shifts from rural to urban populations, from large to smaller families, from starch to protein and political power continues to move from the producer to the consumer. Big chunks of the world population are now connected and have rising incomes, which fuel rising expectations.
Environmentally, we have seen issues with food supply and cost, water scarcity, air quality deterioration and carbon reduction treaties.
And now we have a series of crisis - involving debt, solvency and credit. Excessive debt funded consumption has seen United States debt, as a percentage, increase to 370 percent of Gross Domestic Product (GDP) and it's probably more this week. In the Great Depression, it got up to 299 percent of GDP. We are now seeing the de-leveraging and deflation of assets and, at the same time, inflation is rearing its head with costs and inputs. The whole situation is leading to increased volatility, especially in currency and commodity prices. An unmistakable shift is emerging from west to east, as those countries which lived within their means increase their influence over those who did not. This situation is putting politicians under pressure and unexpected, unintended or unwanted outcomes may result. Protectionism is on the rebound. The choppy waters are here for a while yet.
But there is opportunity in these trends, which are falling more in New Zealand's favour. Remember, we have one billion people in this world who are officially hungry and each year another 90 million turn up on the planet.
The story of New Zealand has some complexities, but overall it's not complex. We have fertile land, it rains, we grow grass and we turn that into protein. We sell this to a hungry and prosperous world and then use the income to pay the bills for our hospitals, social services and schools. We pay for our young, our old and our families. The measure of a nation is how it looks after its vulnerable. But we need export dollars to do this. It's no more or less complex than that.
We have done this for more than one hundred years and have come a long way in that time, but we have a long way to go. Water, not land, is the most limiting factor for economic development based on food production.
We often say Australia is the lucky country. Yes, it has some luck - last year 100 Kiwis left our shores for Australia each day. In Australia, they look underground for their treasure. In New Zealand, however, we should look to the sky for ours. Water is our iron ore. It's what makes us a lucky country. When you look at the planet, we have the one thing that many don't - an abundance of fresh water. This is what makes us a first-world nation, rather than a third. When we look at the diamond that is New Zealand, because of the nature of our comparative advantages, it is agriculture that sparkles brightest.
And we shouldn't forget that we are big!! We are 77 percent of the land mass of Germany and bigger than the United Kingdom. We have a coast line longer than mainland United States. While our population is small relative to those countries, we have significant opportunities going forward; it's just making the most of them.
But let's talk about Wellington.
Wellington is a fantastic village to live and bring your children up in. It has a lot of strengths, but is clearly coming under pressure. Wellington has always benefitted from agriculture. The ferry provides a link between North and South Island farms and agricultural supply organisations. The port and airport are a gateway for some of our export produce and imported inputs.
Service providers to agriculture have been based here for some time, as have various Government agencies such as MAF and the New Zealand Food Safety Authority. We have NGOs such as Federated Farmers, and industry good bodies such as Meat and Wool New Zealand. Historically, we have had meat company head offices and dairy companies such as Fonterra and, latterly, FMG. Of course, the Petone foreshore was the location of the Gear meat plant. It is perhaps symbolic that, where that plant used to be, there is now a Warehouse, where everyone gets a bargain.
And, of course, Wellington has benefited heavily from the money that agriculture has earned the country. About 65 percent of everything we earn overseas comes from our primary sector. The current recession that New Zealand is in was kicked off by the drought - not the credit crisis. The reduction in payout from $7.90 to a forecast $4.55 is worth about $9 billion over the next two years - that's $9 billion less than what it would have been if the payout had stayed at the peak level over that time. This is no small change.
When governments and government departments make decisions about policies that affect farmers, they should be motivated to make it easier not harder. If they make it harder, then less money is earned and in the end public service jobs go.
As well as being the seat of Government, Wellington has other strengths - its tourism, its film industry, its events based around the stadium, its arts community and its shopping.
But it has made some strategic mistakes. A key one in my view was made in the 1970s and ‘80s, when it built the Michael Fowler Centre. For some reason it didn't invest similar amounts into extending the airport so that it could take 747s. At a time when corporate ownership was moving overseas and the Government of the day was trumpeting Wellington as the Switzerland of the South Pacific, the city seemed to work hard to retain the existing airport just as it was, meaning it took two days to get to Sydney. This strategic failure gave many CEOs the excuse to move north, and they have in droves, hollowing out the local economy and reducing the depth of opportunity for the next generation.
Right now Wellington's council appears to be making another strategic blunder. Councillor Coughlan, who I know well, tells me that council is progressively moving to make it harder for cars in Wellington city. As she says, where is the shopping mall that makes it hard for cars? We are advertising Wellington at the moment as a shopping destination, but every week more initiatives are implemented to make it harder for cars. Last Christmas, I took our six kids out to Queensgate to do the Christmas shopping and, with other centres making it easier for cars, more people and more shops and more activity will leave the central business district. So Wellington loses its head offices and now is working to lose its retail strength and critical mass.
But it has made some strategic successes such as building the stadium on the railway yards and investing and assisting film production to become established.
So what impact does the new Government have on both agriculture and Wellington?
This Government is different. The key difference is that it is interested in solutions, not so much in politics. Secondly, it has inherited a set of accounts that has deteriorated massively over the last 12 months. Its view is that the economy needs to move from debt fuelled consumption to investment and export-led production.
For the public service, "free and frank advice" is back! But do they have the capability to deliver?
The question for Wellington then is what can it produce? If it is only reviews, meetings and ways of making things harder for the productive sector, then I would suggest that the chickens will come home to roost and many jobs that don't produce anything of value will be lost. Relying on Government largess and stupidity with taxpayers' money is a high risk game these days. The same should be said of local government as well.
One example is the Waterview tunnel. Costed at over $3.2 billion, or one million a metre, it was a tunnel without a hill.
There is also a bunch of policy issues that Wellington can help agriculture with.
Farmers are like a pair of socks - sometimes you get the odd one. But every farmer knows he or she has a responsibility as custodians of our land and water resource. It's simple; every farmer wants to leave the land and water better than they found it.
As an organisation, Federated Farmers is driven by our farmers and our countries need for us to be able to farm for generations. We are driven by our need for viable farm businesses and families and by our need to manage off-farm risks. To do this we need to look over the horizon and adapt and change to whatever challenges or opportunities are coming at us like a train in a tunnel.
We have a bunch of risks including weather, currency, commodity prices and carbon.
Importantly, we have regulatory risks, which are magnified under the current MMP environment - one where the demographic trends are against us. So the Federation works in the corridors of power in Wellington and at every local authority across New Zealand. In the last 100 days we have submitted 100 submissions, all to manage farmers' regulatory risks.
Going forward we will focus on some critical issues relating to our ability to farm for generations. These include:
Farming viability
- Expenses - inputs, compliance, rates
- Incomes - farm gate returns, supply chain, trade access, market structures
Farming for generations
- Environmental sustainability - ETS, erosion, (need to be in the black to be green)
- Infrastructure - roads, data,
- Water - allocation, quality, storage
- Property rights
- Succession
- Skills/education
- Research
- Energy
- Urban rural understanding, perceptions
- Investment/capital
But I want to focus on just a few today:
Environmental sustainability and the RMA and ETS. We need to remember that we are not China - we produce 0.2 percent of emissions globally but 1 percent of food. Yes, agriculture is 50 percent of our essentially third world emissions profile, but right now there are no mitigation techniques available except de-stocking. We see what drought does to the social, economic and environmental fabric of communities, so we need to invest in research, plant some trees, and invest in water storage, because if it does get a bit hotter it's better to have a bottle of water at hand. As a practical nation, we need practical solutions.
This brings me to water and our need to get the ownership, allocation, management, quality and storage of that water right. That will be a big challenge. In the city, you don't have to wait for the rain to fall before you have a cup of tea. In the city, you have access to water at the right place at the right time. We store water, we bank it, we save it on a rainy day so we can use it when it isn't raining. So why not do more of the same in the country?
Over the past few centuries, civilisations have discovered that water is the key to prosperity, the environment and to happiness. The Romans, Greeks and Egyptians all knew this. The scale of our engineering challenge in New Zealand is relatively small compared to what those civilisations achieved with the tools they had.
Like those civilisations, we need more fish and less drought. We know from Opuha and other schemes that environmental and recreational values as well as community spirit are all enhanced by using smart water storage strategies. As I was able to report at the Prime Minister's Employment Summit, every 1000ha irrigated creates 30 jobs and injects $7.7 million into the local economy. Rob Fyfe, of Air New Zealand and Helen Kelly, of the Council of Trade Unions, were chairing the group I was a part of and quickly understood the logic behind water storage.
It's not that Canterbury is running out of water, it's that the water is running out of Canterbury and I've yet to meet a fish that doesn't like water 365 days of the year.
If we want to set our nation up for success over the next half century, and if we want jobs and a good standard of living so our children aspire to a future within our shores, we need to choose to harness and manage our enormous water resource in the smartest way possible. We need to ensure we maintain a balance between our environmental, recreational and wider community values.
Infrastructure and roads and data (broadband). We increasingly need to not only shift inputs on to farms and production off, but we also need to shift data as well. With our productivity track record, it is clear that farmers will use broadband for productive purposes. That's why we are a bit puzzled by Government's $1.5 billion investment in broadband, and its current plan to put that money into 75 percent of New Zealand's most densely populated areas. To farmers, this doesn't make sense. Governments should be investing where markets fail and that is at the 25 percent of the population where Government is not going to invest - the rural population. Now we don't want more than the rest of the population, just the same amount. But currently it seems that the remaining 25 percent of the population is to get $48 million, or just 10 percent of what each of the other three 25 percent sections get. So we ask, where is the remaining $452 million? From our perspective, why not give that $48 million to the most densely populated 25 percent where the market doesn't fail and give the rural population the $500 million. We know Government want to get this right and it is pleasing that Minister Joyce has decided to take a bit longer to figure out where to from here with this vital issue
So how can Wellington benefit from agriculture? Well, for a start, it does already. New Zealand needs to leverage off our intellectual and physical assets. Wellington has both. There are opportunities to build on our agricultural intellectual property through nutriceuticals, pharmaceuticals and animal remedies (let's not forget there are more animals on the planet than people) and we have done this. Nufarm and GlaxoSmithKline are just two examples - but they no longer have their head offices here. Wellington has Weta workshop and Xero adding huge intellectual value. But what of our collective ability to provide worthwhile and satisfying opportunities for our young at a first world income?
Today I've suggested that there are many challenges out there, but there are many opportunities as well. We need to bring fresh energy, inspirational leadership and a passion for success. We need to be confident and decisive and support innovation. We need to focus more on solutions and less on problems. We need to celebrate success, as there is plenty to celebrate
And, of course, we need to work together. Urban and rural must shift from a debt funded consumer economy to an investment lead, productive export economy. I am sure we are all up for it.
As John F Kennedy once said, "the problems of the world cannot possibly be solved by sceptics or cynics whose horizons are limited by the obvious realities. We need men who can dream of things that never were". As an organisation, we need to deal with the obvious realities as we navigate towards successful solutions on many issues in the short and medium term. But as JFK says, we also need to dream of things that never were, as we look over the next few decades.
New Zealand's future and first world status depends on it.
