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A good story under the bonnet

Two serious and eminently qualified commentators singing from the same song sheet sends a pretty strong signal about the current state and future direction of New Zealand’s economic growth. For me that was perhaps a key takeout from this week’s Colliers International/Northington Partners client function. Presentations from Cameron Bagrie, Chief Economist with the ANZ Bank and Hon Ruth Richardson, past Minister of Finance and current professional Director were aligned. While the topic was billed as “Foreign Investment in New Zealand Agriculture” the two speakers took the opportunity to canvas a much broader perspective with regard to our economy.

In setting the scene for the current situation Cameron was very clear that our national philosophy of “spending today and paying tomorrow” has resulted in one simple dynamic – as a nation we are short of savings. While we have certainly improved the savings mind set over the last decade we still have a savings shortfall. The outcome of that is quite simple – we have two ways to address the shortfall, we either borrow more or we sell assets.

With two sides to the asset sale coin, the trick in achieving progress in this space is ensuring that we sell our assets well and reinvest well to maximise our return.
In terms of the asset sales, Cameron is quite adamant that we have an international sales process that facilitates and encourages good and strong international investment partners – our land isn’t going anywhere and the strong regulatory environment in this space offers protection. However, the other side of the equation is our legacy of reinvesting in underperforming international assets. It’s absolutely essential that we achieve positive change in this process to fully benefit from sales.

China is now our second largest trading partner, accounting for 21% of foreign investment in New Zealand. Yet despite much of the xenophobic debate that plays out in the media China accounts for only 2% of foreign investment. This gap in connectivity between trade flow and capital account flow was highlighted as a key issue with a very real requirement to unlock and increase alignment between these two measures.

Another strong force at play is the structural and secular change we are currently undergoing both nationally and internationally. Future economic success will be dependent on how we deal with these shifts and manage or engineer change to take full advantage of the situation.

Cameron’s parting comments were reassuring that “under the bonnet” our story is a good one with agriculture playing a strong role but ensuring greater alignment and connectivity between our capital account flow and trade flow is essential.

In her opening remarks, Ruth alluded to the fact that her and Cameron were the perfect tag team so it came as no surprise that messaging was aligned. Ruth highlighted the four key requirements for successful growth which included capital investment, two way trade, talent and a change in the cooperative business model that dominates the agricultural sector. The emphasis was very strong on the need to embrace a market driven premium model that establishes New Zealand as “selling the gold standard”. If we are to deliver on the government’s target of doubling our agri exports in the next twenty years then we need to deliver on a value add strategy that is smart on four levels.

We need smart capital – this means we need an injection of significant foreign capital. We need smart markets, and as many as possible, which means pursuing free trade agreements. We need smart people which means deepening our talent pool and we need to urgently address the structural deficiencies in our current agri business model. The market is currently dominated by the co-operative model which in Ruth’s view does not enable us to embrace innovation and optimise opportunities. Ruth encourages adopting a business model that facilitates the shift towards development of the premium business model.

The test is for those of us with the ability to create change in this space to take up the challenges offered by Cameron and Ruth. I am able to offer some personal insight into recent decisions undertaken at Crighton Anderson that have seen us shift path in order to optimise opportunities. Our recent alignment and rebrand to Colliers International was undertaken with this outcome in mind.

After twenty years operating in the rural valuation sector and having established ourselves as the leading specialist valuation practice, we made the decision last year to join the Colliers franchise. The decision was made based on the strength and opportunities that being part of a global brand offers both us and our client base. More and more often our clients are looking for international connections and precedents – this new relationship will enable us to meet that need. I know this is just a small example in the scheme of things but it is meaningful for us as a national and international operator with a strong rural sector influence.

I thank Cameron and Ruth for their time this week and also guests that attended and enjoyed the fabulous Hagley Oval venue.

Filed under: Economy

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