This event will rewrite all the history books that is for sure. In my columns last year, I was hinting that we were at the end of a huge bull-run, but I never ever expected a virus to cause the slide.
So, how is it going to look? We are fortunate to have several excellent commentators who also have an eye on the future, not to mention Mike Hosking, Jamie McKay and Paul Henry. We are also lucky to have Adrian Orr in charge of the Reserve Bank.
Love them, or hate them these guys are able to receive information, sort it in their heads and then tell it how it is without any packing on bull …
Once we get through to the winter, it is going to look a whole lot different. This will be the biggest event since the Great Depression but will not resemble it.
Many businesses will have failed and most of the tourist businesses will be in deep strife. People will have lost jobs and there will be many properties on the market because they just cannot service the debt. And my heart goes out to them, but there seems no way around it. There will be forced sales of distressed assets. Despite Grant Robertson promising the world and demolishing LVRs, Banks will know their limit, enough is enough, and they will have to be sold. With many businesses gone unemployment will jump, and we are likely to see a new poor, sadly.
The Government will print about $50 billion to try and stimulate the economy, but it will be like a “dead cat bounce”. The economy will fall, lift a fraction and then go into a long slow recovery. With pressure on everywhere if you have a dollar are you going to spent it, or save it? Saving it is just what the government does not want you to do. This is where the ‘multiplier’ comes. Does that dollar disappear into your bank account or get used and passed around the community three times in a day? The government wants the latter.
Tourism is largely over, so stay home and see your own country. Don’t use the search engines like Trivago to find accommodation, pick up the phone and call the motel direct and cut out all that money being siphoned overseas by these online companies. Buy local, make your own stuff, employ local people.
Farming will still be, I repeat, ‘still be’ the backbone of the New Zealand economy. And yes, there is an oversupply of milk in the world, but my pick is that with all the distortions the food chain will be broken, and we will face a world food shortage. What will our product be worth then?
On China, they are the elephant in the room. It is very concerning how they are taking over the South China Sea and there seems finally to be some push back on that.
Are they opening up better transport lines to come and collect the food direct from the strategic assets in and around the Pacific that they have been steadily purchasing while we have been asleep at the wheel?
Look, like it or lump it, this next 12 months is going to be challenging, frightening and for some just downright terrifying. We need to be aware and look out for these people and reach out to them. For many it will be business as usual, but you need to ‘press the reset button’ and hold it down long enough to try and shift the way your brain sees the world. Going forward nothing, like nothing, is going to stay the same.
Disclaimer – these are the opinions of Don Fraser of Fraser Farm Finance. Any decisions made should not be based on this article alone and appropriate professional assistance should be sought.
Don Fraser is the Principal of Fraser Farm Finance and a consultant to the farming industry. Contact him on 021 777675