Political & Economic week ahead: Fonterra milk price fallout
Rob Hosking gives his in-depth analysis on the big stories to watch out for this week on NBR Radio and on demand on MyNBR Radio.
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The dairy downturn looks likely to dominate the politics and the economics of this week.
Parliament returns: there will no doubt be an opposition attack on the government for its economic approach, which Labour and the Greens say is based entirely on cows, Canterbury reconstruction and Chinese house buyers.
That analysis is, like all political slogans, an oversimplification and not a particularly accurate one.
But there is enough accuracy there for it to hurt. Talk of “crisis” is over-cooked.
Which is not to say things are not of concern. The dairy downturn is not going to be a minor blip and the way it is being managed is a legitimate concern for debate.
Fonterra’s decision to cancel $600 million of investment and use the funds to smooth farmer payouts over the downturn has the major downside of drawing on capital earmarked for projects to boost the company’s productivity and value-add products.
The downturn has raised the question, again, of diversifying the New Zealand economy – something which comes up every time one of the “soft” protein commodities in which the country specialises hits a problem.
“Diversification” has been a slogan since the first wool shock of 1957. Intuitively, it sounds like a good idea.
However, it is a slogan rather than a strategy and it cuts across the most important rule of both economics and business, which is that one should concentrate on what one is best at.
NBR Radio
Mon, 10 Aug 2015
Mon, 10 Aug 2015
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Political & Economic week ahead: Fonterra milk price fallout
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