Economics
The New Zealand economy has been struggling to recover from the 2008-09 recession and the shocks caused by the Canterbury earthquakes. If the economy is to recover in a sustainable way, there must be a more export-friendly environment and a rebalancing of the economy in favour of the tradable sector. To achieve this rebalancing, all government policies should promote increased productivity, efficiency and economic outcomes and ensure international competitiveness for the tradable sector.
Fiscal policy
Federated Farmers supports fiscal responsibility and a flatter tax system with lower tax rates, both for personal income tax and company tax. The Government should aim to return to surplus as soon as possible. It should adopt a spending target of 30 percent of GDP and to achieve this target spending should be capped. Furthermore, all spending should be reviewed to focus it more on productive investment to grow the cake, rather than redistribution of a static cake. These policies would reduce the tax burden, make government more efficient and make it easier for the Reserve Bank to control inflation without resorting to a tight monetary policy.
Monetary policy
Federated Farmers supports the Reserve Bank Act and the maintenance of price stability as the Reserve Bank's key goal. We also support the use of the Official Cash Rate as the primary tool for implementing monetary policy, although prudential regulation of the financial system can be a supporting tool. The Federation considers the best thing any government can do to ease pressure on interest rates and the exchange rate is ensure all its policies are aligned with the goal of improving productivity and making the Reserve Bank's job easier in controlling inflation.
Banking
Farming is reliant on bank capital for investment to grow the farm business, for seasonal finance and in some cases for survival. Interest rates and other bank decisions can have a huge impact on farm businesses and farming families' economic and social well-being.
Although most farmers are satisfied with their banks, some are definitely not. Dissatisfaction relates mainly to tighter conditions for both new and existing credit and increasing costs of credit that have been imposed since the global financial crisis. While most farmers have accepted a return to fundamentals, some have disputed changed conditions with their banks. Many farmers feel dissatisfied with existing dispute resolution options. Farmers should therefore have better access to the Banking Ombudsman Scheme.
The Reserve Bank has also implemented new requirements for bank funding and capital adequacy. Federated Farmers supports measures to strengthen the financial system and ensure that risks are appropriately managed, but aggressive implementation of the changes could be harmful for farming if they significantly increase the cost of credit or restrict its availability. We also want banks to be more transparent in the setting of interest rate margins for rural lending.
Overseas Investment
Overseas investment in general is both necessary and beneficial, providing needed capital for investment, generating jobs and increasing income, as well as helping embed and disperse the benefits provided by innovation. It also improves productivity, competition and consumer choice. Profits generated by foreign investors accrue to the New Zealand government through taxes.
Overseas investment in farmland has generated significant debate in recent times. Federated Farmers supports the purchase of land by immigrants who wish to farm the land and so benefit both their local communities and the economy in general. There are also benefits from high wealth individuals purchasing farmland of high scenic value. We do have concerns though around some recent developments regarding the mass aggregation of farmland and the possible effects of this on farming and the economy and the rules around these types of investment have recently been tightened.
Federated Farmers wants:
- An environment that encourages investment in the economy be it from overseas or from within New Zealand
- Rules on overseas investment in farmland that strike an appropriate balance between encouraging investment and addressing concerns about some types of investment
- Rules on overseas investment in farmland that provide both landowners and potential investors with certainty
- Objective, transparent, and consistent administration and enforcement of the rules on overseas investment in farmland.
WHO SPEAKS FOR FARMERS ON ECONOMICS?
The National Board spokesperson for Economics is National President Bruce Wills he can be contacted at bwills@fedfarm.org.nz or you can contact Federated Farmers National Policy Manager Nick Clark at nclark@fedfarm.org.nz.
