Don't look to global growth numbers for warning of another recession - look at six economic indicators beginning with C and watch out if they start to move, says economist Cameron Bagrie.

The former ANZ Bank chief economist, now head of Bagrie Economics, told more than 200 dairy farmers at an industry forum in Hamilton the global economy was pretty well balanced but warning signs were starting to show.

"Statistically we are due a correction. This doesn't mean a downturn is pending, what it means is we've got to be careful. It's the law of the number eights. We had recessions in 1978,1988, 1998 and in 2008.

"My personal view is the global expansion has a few more legs yet, but the warning signs are starting to increase."


Bagrie said the six "Cs" were confidence; contagion risks; cost of funds; commodity prices; currency; China.

Confidence was measured by whether people are confident or not. The potential for contagion risks was when economic indicators, for example the global equity market, particularly in the US, moved in a correlated way.

New Zealand borrowed a lot of money and was reliant on offshore capital because of its weak savings pool.

"That makes us reliant on global lenders. If we start to see the cost of funds move up it's typically a sign something's going on," Bagrie said.

Commodity prices could move symptomatically on developments in the US and China, and on currency, the New Zealand and Australian dollar tended to move "at light speed" in response to events.

"So if you start to see them move overnight, it's normally a sign something's going on. "

Lastly, China was a country economists paid close attention to, he said.

"It's one of the world's biggest economies and we need to be there. But China's got a lot of debt. It's a model where investment dominates with investment around 45 per cent of GDP. That's a sign of over-investment and you wonder if we are putting money in the right places.


"At the moment things look okay but if we start to see those six Cs move a bit, watch out, that will be a sign we are set for that 10-year [recession] pattern to start to repeat."

Bagrie told the forum the fourth industrial revolution was coming at New Zealand fast.

It was a fusion of technology, overlapping between the physical, digital and biological, he said.

The difference between the fourth revolution and its predecessors was it was non-linear, growing at pace and impacting a wide range of industries.

"I saw some figures about how herbicide use could fall once artificial intelligence is utilised more efficiently - the estimate coming out of the US was for a 90 per cent decline.

"And Xero is turning up to Fieldays. That tells you something."


The biggest challenge of the fourth revolution so far was what will the future of work look like, particularly for young people, said Bagrie.

"I expect and hope the upcoming Budget has a very strong emphasis on setting the education sector up for the future of work because technology is a massive issue.

Bagrie said it disturbed him that a lot of companies were not prepared for technology disruption.

"Surveys coming out in the next month show we're not ready. The very simple equation here is that no matter what sort of business you are in, you need to innovate at a faster pace than the disruptors can get distribution capability.

"We've got to get the R&D spend up and boardroom discussions need to change as well.

"The old model for a director was to make sure you had good governance and it was centred around two basics. You made sure the firm had some unique difference in product or service offering. That defined your ability to compete, get market share and do well.


"Second you needed.... a good culture. That today is a partial condition of success. What you need to be embedding in the DNA of the organisation is innovation, adaptability, flexibility, the ability to shake things up and change."