Groser: We will get through this
TRADE: The trade analyst is urging farmers to have faith despite the declining chances of a soft economic landing, reports
Trade analyst Tim Groser is comforting farmers that New Zealand’s “resilient” agriculture export economy has fronted up to more severe challenges than it is being exposed to now.
That is despite a soft landing for inflation looking increasingly unlikely and big changes to military views and business models from Russia’s invasion of Ukraine.
Groser said doomsayers predicting the end of global mobilisation were wrong.
He told farmer suppliers at Silver Fern Farms’ Christchurch conference to keep the faith as New Zealand had made enormous progress in the past 40 to 50 years since he became involved in the trade sector.
“I’m not selling you the argument that we are living in the best of all possible worlds,” he said.
“I’m saying we have demonstrated resilience, we are facing new challenges, but if I wanted to sum up my overarching conclusion in a few words I would say this: We will be fine, we will get through this.”
Groser said he could remember the deep concern of senior officials when he got his first job at Treasury’s external trade and economics division.
That was in a far more challenging period when New Zealand was reliant on a British market that had declined from 90 per cent in 1950 to just under 50 per cent in 1973 when it joined the ECC (now EU), he said.
“We had nowhere to go as a country. There were no operational rules applying to agriculture . . . it was the Wild West out there and China was commercially irrelevant, coming out of the chaos of 10 years of the Cultural Revolution.”
He said changes in the global macro-economic environment and sharp geopolitical shifts — focusing on the Ukraine conflict and tougher environment with China — posed new challenges to New Zealand.
The Goldilocks scenario that the world’s major central banks could pump trillions of dollars into economies and provide money at near-zero interest rates to engineer a soft land
If you want to be in one of two industries in this more difficult global macro-economic situation what would you be in? You would be in food or energy. — Tim Groser, trade analyst
ing was not plausible, he said.
“I think that’s highly improbable now, the tightening cycle has begun.”
New Zealand had begun its tightening cycle early and others had left it too late with both the United States and Europe on inflation of more than 8 per cent, he said.
Groser said consumer demand would be impacted and the world would have to work its way through that.
“It also matters because I’m well aware on-farm costs have been accelerating.
“I think in the last 12 months I read a figure of 10.2 per cent and in dairy, it’s larger, around 12.5 per cent, but don’t forget you people have some hedging here.
“If you want to be in one of two industries in this more difficult global macro-economic situation what would you be in? You would be in food or energy.”
Foreign policy shifts
He said foreign policy shifts had accelerated when Russian tanks moved into western Ukraine in February.
It had completely changed the military and strategic views of important trade players around the world with Sweden and Finland dropping their formal neutrality position to join Nato, Germany pledging to become a major military player and Japan talking of supporting US missiles on its soil.
This would affect traditional business models, but global mobilisation had created millions of customers and would still be around.
“Don’t listen too intently to these doom and gloom people telling you this is the end of global mobilisation. No, it’s the beginning of an adjustment of global mobilisation.”
Groser said he was horrified by the lack of momentum with world trade policy. However, trillions of dollars of investment in huge economies and hundreds of millions of jobs depended on preserving trade around the world and while there might be some erosion around the edges, the basic system would remain in place, he said.
New Zealand had developed successful government free-trade deals including with China, Japan, Canada, Mexico and the Comprehensive and Progressive Agreement for TransPacific Partnership.
“There are two recent ones and controversially for you — the EU.
“Look, I’m obviously disappointed, as your spokespersons are, with the results on meat and dairy, but I think the results elsewhere were very positive.
“And, secondly, it would be a complete fantasy to ever believe we were going to negotiate something comparable with what we have with the UK or Australia.”
The number one priority should be getting the Australia, New Zealand and UK FTAS through because they were world-class and would give New Zealand an insurance policy should China “go south” in the years ahead, he said.