By ANDRA NEELEY*
There is a sort of daacéjagrà vu quality about the present economic climate for farmers.
In 1984 there was a Labour Government, a devaluing dollar, good commodity prices, a profitable financial year for farmers and then, whoops, it all turned to custard. Inflation rose steeply, interest rates soared, huge capital inflows drove the dollar up, and commodity prices headed south in a very big way.
That is where the similarities end, because 15 years ago all this was accompanied by the most radical overhaul of the economy we have experienced. The removal of subsidies and the wholesale withdrawal of Government support convulsed the entire agricultural infrastructure. On both a personal and industry-wide basis it was a time of considerable stress.
Fifteen years on, we are undoubtedly in a more robust state to cope with the reversals our financial situation could bring.
Risk management, be it in financial, farming practice or personal aspirations, has become accepted as good business. We have been forced to become self-reliant, and the one certainty is that no Government assistance can be expected should further hard times befall us.
Right now, the colour of the Government, the health of the dollar and the growing inflationary pressures have not resulted in anything other than good incomes for farmers, largely caused by the low dollar.
But a slight prickle between the shoulder blades is starting to make itself felt.
How low can the dollar go? How high can petrol go? How much pressure will be put on inflation? What will the Reserve Bank do? How soon and by how much will interest rates go up? When will the dollar react to higher interest rates and start to pull investors in the door? Will the beef cycle stay in our favour? The answer to all these questions is largely in the "depends" category.
Many financial experts seem loath to make firm predictions. Many thought inflationary pressures would be kept in check with a competitive and open economy. But the inexorable rise in oil prices has put paid to that: oil lubricates our economy, and its cost affects prices.
Perhaps this fuel-price hike has highlighted the fundamental problem we have chosen to ignore for the past decade. As an economy, we have used a lot of other people's money to maintain our lifestyles. Most of the investment has been in property of one sort or another. Does selling houses to each other really expand a modern knowledge economy?
National Party finance spokesman Bill English, interviewed on a protest-busting bus in Melbourne, thought that it probably did not, which was why he was keen to hear what Asian business leaders at the World Trade Forum thought.
He might be right, but you have to reflect that his Government was in power for 10 years while we spent our and other people's money on our property market; so it is a long-term structural addiction.
The answers will come, and in hindsight we will all accurately analyse them.
Meanwhile, on the farm, spring is just about the best anyone can remember. Milk prices are rising, stock prices are great, even wool has lifted off the bottom of the tank, so farmers are smiling. The car is costing more to fill, the transport and fertiliser bills will be higher, but most other spending decisions can be controlled.
As long as the dollar does not take off, we can service the expected rise in interest rates. And if it does take off and things turn gloomy, well, we have been through all that before and the practice made us more innovative and much smarter.
* Andra Neeley is a farmer and Waikato regional councillor.
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