Major Reforms Needed to Safeguard Our Future

New Zealand Centre for Political Research

The New Zealand Centre for Political Research is a web-based think tank that takes a research-based approach to public policy matters and encourages the free and open debate of political issues. www.nzcpr.com

New Zealand is a small country located miles away from our major trading partners. Fortunately we have a temperate climate, an innovative population, and political stability. Over the years we have developed great expertise in growing products that the rest of the world wants, As a result, the primary industries – farming, forestry, fisheries, horticulture and viticulture – directly or indirectly provide three-quarters of the country’s export earnings.

How Now Brown Cow

 

The four traditional commodities of dairy, meat, wool and timber make up almost half of all exports. That leaves our economy vulnerable to global commodity price fluctuations – especially dairy which comprises 30 percent of total exports.

With geopolitical events now impacting heavily on our export markets, surely the time has come for the government to prioritise the removal of the legislative barriers to progress that are stifling New Zealand’s economic development and costing jobs.

Of the country’s top traditional export earners, forestry and dairy continue to slide, while prices for meat and wool appear to be trending upwards.

New Zealand is now the largest supplier of softwood logs in the world, contributing over 20 per cent of all volumes traded. This compares to the US and Russia which both supply around 15 percent.

The problem is that in our main market of China, a slowing of construction has led to a build up of inventory and a lowering of demand. This has resulted in a sharp decline in prices – in the six weeks from mid-May to the end of June, some settlements in China dropped by an unprecedented 25 percent.  The situation is not much better for processed timber exporters, who have to compete with product from countries with lower labour costs, as well as coping with the falling demand.

The challenges confronting the dairy industry have become extremely serious – since the beginning of the year, New Zealand dairy prices have fallen to their lowest level in more than five years. Prices have slumped nearly 50 percent from a peak in February.  As a result, Fonterra has further reduced its forecast payout to farmers in the current season to $5.30 per kilogramme of milk solids, down from last season’s price of $8.40. At this level it is estimated that up to a quarter of dairy farmers with high levels of debt could have difficulty meeting farm working expenses and interest payments.

This latest $5.30 payout is based on predications that global prices for whole milk powder will recover from the present US$2,599 per tonne, to about US$3,500 by March next year. If prices do not recover but instead remain at current levels the milk payout would be just $3.90/kg of milk solids, according to forecasts produced by AgriHQ. At that payout level, virtually every farm would be unprofitable.

It is sobering to think that the conflict in the Ukraine is undermining New Zealand’s economic future, but that’s the reality for a country that relies so heavily on global trade.

In August, Russian President Vladimir Putin implemented a retaliatory food import ban on countries that had earlier placed sanctions on Russia for supporting pro-Russian separatists fighting Ukraine government forces along its border. That ban did not include New Zealand, but since the sanctions were imposed, demand within Russia for dairy products has fallen dramatically.

Russia was the second-largest global importer of dairy products after China. With China also struggling with a build-up of dairy inventory, lower demand, and depressed prices, thousands of tonnes of dairy product are now having to find other markets. It is a classic case of over supply leading to lower prices. For New Zealand dairy farmers, who are moving into the peak of the season, the timing could not be worse.

This fall in dairy prices should act as a wake-up call to New Zealanders that we urgently need to diversify and expand our economic base to better buffer ourselves against such trade shocks. It should become the catalyst for the government to embark on a programme of real reform aimed at safeguarding our economic future.

In 1998, a World Bank report ranked New Zealand as second in the world in terms of ‘natural capital’, behind Saudi Arabia. We have a wealth of land, minerals, and water. Only 0.8 percent of our total land area is used for ‘built’ activities such as housing, roads, and commerce. That means we have a tremendous opportunity to harness our abundance of natural capital in the national interest.

The problem is, however, that laws that once facilitated development have become mired in bureaucracy, turning them into a tangled web of counter-productive regulations.

Take the case of oil and gas exploration. New Zealand is recognised as one of the few remaining untapped oil and gas frontiers in the world. Our fledgling oil and gas industry is already reducing our dependence on imported oil, producing thousands of high paying jobs, and contributing significant tax and royalty payments to the government. If the exploration by the Norwegian company Statoil in the Northland Basin proves successful, it would provide immeasurable benefits to the impoverished North.

However, at the Petroleum Summit held in Auckland last week, accounts emerged about some of the ridiculous bureaucratic requirements that are being forced onto the industry.

Lawyer James Willis, a director of Octanex, explained that in 40 years there had been no recorded environmental harm to whales from seismic testing. He said that whales were smart animals and would not linger in an area if loud noises upset them – just like someone walking down a street would cross to the other side to avoid a workman using a jackhammer.

He went on to outline some of the bizarre conditions that were now being imposed by the Environmental Protection Agency (EPA) on companies carrying out seismic surveys: “Before an offshore seismic survey can be undertaken, the operator must notify the Department of Conservation, lodge a marine mammal assessment, commit to adhering to the 2013 code of conduct [for minimising acoustic disturbance to marine mammals from seismic operations], have on board at all times a marine mammal observer, and have on board passive assessment monitoring equipment.”

He explained that these were relatively new requirements to protect whales from the unproven effects of seismic surveys. In the unfortunate event of a whale stranding, companies were required to undertake autopsies, just in case it wasn’t the seismic surveys that caused the whales to strand. When the autopsies proved inconclusive, they were expected to undertake an MRI or CT scan of the dead whale: “Well, I reckon there is as much chance of getting a CT scan of a rapidly decomposing dead whale as there is of the Green Party suddenly supporting deep sea drilling.”

Mr Willis estimated that satisfying the EPA’s “pedantic requirements” could cost as much as $3 million and had to include information on such things as protecting the habitat of marine reptiles, even though they do not live in New Zealand waters.

His sobering message to the government was that these unreasonable bureaucratic hoops were depriving the industry of what had been promised – “mature, intelligent, adept and sensible regulation”.

Probably the best known area for regulatory madness is the Resource Management Act (RMA). Late last year the Prime Minister explained the need for reform: “New Zealand needs planning law that enables economic growth and jobs, as well as providing strong environmental outcomes.  The changes we are introducing are about striking that balance between our environmental responsibilities and our economic opportunities.”

In making the case for reform, absurd examples were highlighted – $7,000 for a consent for a 4m extension to an existing deck, requiring a resource consent and an arborist’s report to trim a backyard tree, and consents being demanded for a child’s tree house. However, in spite of proposing a raft of worthy changes to the RMA, National failed to address one of the law’s most problematic areas – the inappropriate elevation of iwi rights over those of all other citizens.

We are hoping that the truly ridiculous experience with iwi consultation described by this week’s NZCPR Guest Commentator, property developer Sir Bob Jones, will persuade Mr Key that race-based rights – and the industry it has created – have no place at all in our planning laws and should be removed:

“Recently, a shop tenancy changed in a modern 17-storey Auckland CBD office building owned by my company. The previous tenant had blocked off some of its window which we now intended putting back to the conventional shop front.

“We were informed by a planner my Auckland office uses for council dealings (which can be laborious) that under the new council rules, changes to a building’s appearance require resource consent and we would be subject to penalty if we simply put back the window.

“If that’s not outrageously absurd enough, things then became truly Kafkaesque and illustrate why the Government, against ill-considered opposition parties’ objections, wishes to tone down the Resource Management Act.

“For we were then told that under the new Draft Unitary Plan, not yet enacted, our building being within 50 metres of a designated Maori heritage site, we needed RMA approval (for a new shop window, for God’s sake), this instantly forthcoming at a cost of $4500 plus the approval of 13 iwi.

“The council refused to advise the addresses of these iwi outfits, yet added that without their consent, we can’t put back the window.

“So the planner located then wrote to the 13 iwi, ranging from Taranaki to Whangarei.

“Five replied stating they had no concerns while others said they were considering the matter, presumably calling huis to weigh up this window crisis.

“One respondent bearing that fine old Maori name of Jeff Lee, representing something called Ngai Tai Ki Tamaki, contacted the planner.

“After advising the planners verbally that no Cultural Impact Assessment Report was required for the window, he nevertheless asked them to consider it – brace yourselves – given his ancestors, centuries ago, gathered in the vicinity.

“Lee then wrote, outlining his terms for ‘assessing the window’s cultural impact’ which, he said, would take him ‘a total of six to eight hours’.

“For this he sought $90 per hour plus GST and ‘travel expenses of 0.77c p/km.’

“At this stage we became involved and told the planners to tell Mr Lee to get stuffed. In the words of my company’s manager, a historian knowledgeable in Maori history and who speaks the language: ‘It’s a classic case of bureaucrats worried about cultural correctness without thinking through the consequences.’

“I more succinctly call it a racket.”

If New Zealand is to grow and prosper in a world that is increasingly unstable, it is vital that legislative roadblocks to progress are removed. That includes – as the above examples illustrate – the extremely damaging concessions made by successive governments to appease both the environmental lobby and iwi authorities.

New Zealanders expect our government to take tough decisions in the national interest. That means standing up to self-interested and vocal activists, by not only removing the ridiculous environmental regulations that have crept into our regulatory framework over the years, but by eliminating all race-based laws and practices as well.

THIS WEEK’S POLL ASKS:

Iwi consultation under the Resource Management Act has become big business in some parts of the country – should it be retained or removed by National?

 
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