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A two-speed economy?

It's all getting very interesting, isn't it? New Zealand is blessed; we have for sale what the world is demanding. Food. Furthermore, we have good quality food, still with the clean green image. Something that must be maintained at all costs.

The world is short of food. The butter and food mountains have vanished, subsidies are off. Australia has had a rough season. India and China want to eat protein as their standard of living rises, only to find the world food larder empty. It really is empty. Much of Fonterra's product is already sold forward. The world's food store is down to 38 days, possibly less by now.

So it's all go out there on the farm. Demand and prices for all food will increase. This is across all sectors of food including dairy sheep and beef, honey, fruit, vegetables and so on. Most countries consume the majority of their food produced, but not so for New Zealand. We are fortunate to have a modest population and be net food exporters. This will be our key point of difference to the rest of the world.

It is interesting to see everyone clamber towards the farming industry as product prices rise. There is now talk of an agricultural led economic recovery.

I put it to you: it's more than that, it is an agricultural revolution.

Managed properly, it could put New Zealand further up the ranking in the list of wealthy countries. This could be a great time for New Zealand but it needs to be managed carefully.

All New Zealanders need to recognise the role agriculture has to play in our economy. All the talk of dirty dairy and so on should vanish as the whole country works to maximise the opportunity that is in front of us. This means managing the resources, looking after the environment and maximising the return to the country.

Food prices are expected to stay up for 5 – 6 years. Imagine that! The wealth creation could be massive. Dairy farm incomes are up 50%, so opportunity abounds for them also.

One of the big issues I foresee is that as the economic policies bite on the residential sector there is going to be a lot of hardship for them. Those with 1, 2, 3 or 4 houses all negatively geared, could come seriously unstuck. There could be a number of forced sales as people are unable to meet the increased costs, particularly the increase in interest rates. As the dollar falls, food and petrol prices will increase quite sharply. The cities will struggle until the agriculture money flows through. This could take up to two years.

And with the rural economy booming we will have a "two-speed economy". Rural settlements like Hamilton, Morrinsville, Cambridge, Masterton, Gore and Invercargill will all boom on the back of the rural economy. Auckland, Wellington, Christchurch and Dunedin will take a lot longer to recover.

The other issue that needs to be considered is that there could be a lot of jealousy from those sectors not benefiting from the rural wealth. Well they need to get over it. I think farmers, particularly dairy farmers, deserve everything they get. The risk, long hours, dedication and just plain hard work make them a most deserving sector. I know, I've been there and dairy farming is not easy.

So, yes, it is going to be great. It is going to be very interesting. We need to keep fully focussed and take very calculated risks.

We need to realise that there will be some "green eyed monsters" out there and they need to be managed.

There most definitely will be a "two-speed economy". We as a nation all need to work together to make a sustainable and wealthy country, not only for ourselves but future generations to come. And yes, farm values will rise and yes, you do need to have the right structures to take your land to the next generation.


 

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