NZ 'needs ruthless obsession' to be competitive

ALI TOCKER
Last updated 08:51 12/02/2013
Rabobank report
Louie Douvis/ Fairfax Australia

Opportunities: Enhancing the competitiveness of our agribusiness is becoming increasingly challenging, says a Rabobank report.

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All sectors of the economy including agribusiness have to adjust to the reality the New Zealand dollar will be high for at least the next two years, a leading bank economist says.

ANZ chief economist Cameron Bagrie said all four quadrants - business, the unions, central government and local government - need to get together to define a strategy to lift competitiveness and productivity.

"The bottom line is the New Zealand dollar is going to remain elevated for another couple of years. That's what people need to get their heads around.

"People are talking about intervening, printing money and cutting interest rates - but that is not going to do a thing. We need to identify a realistic solution we can achieve rather than taking pot shots at the Reserve Bank."

The "brutal reality" was the New Zealand economy had a mismatch of about 10 per cent between local fundamentals and where the currency resided.

"New Zealand needs to be targeting how we get that 10 per cent lift in productivity and competitiveness," Bagrie said.

To realign the New Zealand currency with local fundamentals, a ruthless obsession was needed across the nation, with all four quadrants prepared to give and take.

"The problem we have at the moment is if you put those four groups in a round room, they will find four corners to sit in."

Businesses needed to be at the forefront, identifying what they could do to lift competitiveness, Bagrie said.

The unions then needed to say what they could do to lift productivity growth. And central and local government needed to ease the regulatory burden and compliance costs, asking what they could do to make things easier, "particularly on the farm", Bagrie said.

"If we don't get that competitive lift, we're going to see the trading sector slowly bleeding. It's like death by 1000 cuts."

Rabobank's flagship Agriculture in Focus 2013 report, out yesterday, said maintaining competitiveness and increasing productivity was vital for New Zealand's agriculture sector to take full advantage of opportunities.

"Enhancing the international competitiveness of New Zealand agribusiness is becoming increasingly challenging," the report said.

"Where possible, these challenges must be tackled in 2013 to mitigate the impacts of the elevated New Zealand dollar and to unlock the growing opportunities for the sector ... "

The main opportunities were presented by the "pressing global need to provide food security" for a growing middle class, particularly in developing Asian economies. New Zealand was well-placed to increase agricultural exports to Asia, Rabobank said, due to existing competitive advantages such as strong trade links.

"However, it is not the only country eyeing the opportunities presented by the increasing food demand from a rising middle class in Asia. Maintaining competitiveness is vital to take full advantage of the opportunities," senior analyst Hayley Moynihan said.

Other key issues facing the agricultural sector in 2013 identified by the Rabobank report include the need to continue to develop trade relationships and agreements, including free-trade agreements.

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The report also said foreign interest in New Zealand's agricultural assets looks set to continue in 2013, "with the country's reputation for quality food production making it an attractive destination for investors".

- Waikato

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