OPINION: It probably won't last - but after decades of largely ignoring little brother, suddenly the Aussies seem to be taking us a lot more seriously. It's been most apparent in their sports news programmes. They got a shock in the early stages of the Olympics when we did a lot better.
Their media got into a terrible funk worrying about how relatively poorly they were doing, and that we might end up with a bigger medal haul: a fanciful notion given their historic pre-eminence in many events.
Many of us - fed a constant diet of news stories about Kiwis migrating across the Tasman for better pay and jobs - might be surprised at the highly positive way the Australian (and international) economists, foreign exchange dealers and the media are now talking up our prospects.
Our Government is seen as stable - certainly compared with the unsettled political situation in Canberra and much of the rest of the world. Having Prime Minister John Key with his successful background in the financial markets - who can speak the same language as the global players who move markets - is an asset.
In spite of our relatively small size and large private debt, New Zealand is increasingly seen as a safe haven: possibly even a better bet than Australia, where there are growing concerns at its massive reliance on a single market, China, for its iron ore and coal exports, where prices have fallen steeply.
Our companies, having years of experience in surviving tougher times, appear to be performing better at this early stage of the June 30 reporting season.
Their sharemarket is picking up, though its indices are constrained by falling prices for mining stocks.
On a 12-month comparison the NZX is up around 11 per cent, and the Australian All Ordinaries is little changed.
The weakness of the New Zealand dollar (compared with theirs) and apparently less unionised and more compliant workforce is considered a plus in lowering manufacturing and production costs, including for newspaper production.
An editorial in the Australian Financial Review last week said the internationalisation of agriculture meant that food could now be processed more cheaply in New Zealand.
“There should be no concern with the ownership or location of these facilities: that's a matter for the market,” it said.
There is a downside in suddenly being seen as comparatively secure in a world where most other countries seem intent on printing money to get themselves out of trouble. Speculative flows ensure the NZ dollar stays stubbornly high. This is eroding export earnings across the board, a plight made worse by a general weakening in agricultural commodity prices in recent months though, happily, dairy prices have shown robust rises at the last two Fonterra auctions.
The problem is that some influential foreign exchange forecasters, agricultural experts and offshore commentators are joining a lot of dots into believing New Zealand's agricultural advantages will put us really in the money over the next few years. Hopefully they'll be right. But we may be too close to the action: we're all too aware of the way unpredictable floods and droughts can wreak havoc with the most reasonable farming forecast.
Adding to offshore optimism have been the massive droughts in the United States (the worst since 1956) and Russia and other severe weather problems in parts of Western Europe and Africa and Asia. These are forecast to massively disrupt food supplies, especially for grain and cereal crops, which are likely to lead to sharply higher beef, dairy, pork, chicken, bread and even egg prices.
Australian commentators - including those in the AFR - predict that the higher global prices will go a long way to help Australia make up for the sharp fall in coal and iron ore prices, presenting them with great opportunity. They reckon we'll do well too.
Viewed from overseas, this sparsely populated part of the world is ideally placed to provide dairy, meat and other commodities to an expanding and wealthier Asia and the world. It is assumed that both Australia and New Zealand could relatively easily bolster production, which, given our unpredictable weather, seems overly optimistic. In an interview in the AFR, one group of currency strategists said New Zealand and Canada were their favourite picks for continued strong currencies. However, because of its relative importance as an international dollar trading hub, the Australian dollar was likely to remain pre-eminent in the trio.
New Zealand Inc deserves a break from the lost decades when our agricultural prices were artificially depressed by protectionist elements in our main markets of the US and Europe. The change began in December 2008 when food prices skyrocketed from their previous peak in the 1970s due to the rise of new money in Asia and a growing appetite for dairy and cereals to produce meat. Even with the recent price falls, commodity prices are still 30 per cent higher in real terms than in the average of the last decade and were strengthening before the extent of the US drought became apparent.
Not helping the US situation is its powerful green lobby. In spite of farmers' requests, Washington will not relax its requirement for the nation to produce sufficient crops to produce 61 billion litres of alternative fuel, ethanol.
- © Fairfax NZ News