| GREEN SCORE | BRAND NEW ZEALAND |
| Effort | B+ |
| Results | A |
July 2007. The New Zealand dollar posts a 2 decade high at 98 yen. But in just 18 months it will crash to be worth less than half that, at 45 yen. This dramatic swing is not an isolated event. Over the last 20 years the Kiwi unit has been through 3 such radical cycles. It is buffeted by oscillating world commodity prices, and investors chasing or leaving our volatile, but persistently high, interest rates. The particularly scary thing is that the magnitude of these currency oscillations seems to be increasing over time.
The degree of volatility we tolerate in our currency is unusual and unbelievable for a tiny nation so dependent on international trade. It might be fun, risky and thrilling for currency speculators and sailors, but it makes it very difficult to be an exporter or importer trying to run a stable business.
When the Kiwi was floated in the mid 1980s, we were promised that this would automatically eliminate balance of payments deficits as the currency would make any necessary adjustment. We’ve learnt the hard way though that this fine theory doesn’t take into account foreigners choosing to invest in our very attractive interest rates.
The volatility in the Kiwi means that even ordinary New Zealanders now have to become foreign exchange experts. That is if they want any hope of protecting the value of their assets in global terms. It’s an extra burden on the long-held belief that ordinary Kiwis need to also be real estate investment experts to get ahead in life. Real estate investment is really just another kind of speculation.
Some suggest that New Zealand’s soaring debt, as we post year after year of large balance of payments deficits, will be the brake on the borrow-to-spend cycle. The global economic crisis partly exposed this weakness and we will hear more about it. New Zealand has the second worst debt to disposable income ratio in the OECD. Only Iceland is worse, and look at the economic and financial carnage happening there.
It is very possible that our overall debt level will eventually be the brake we need. But will its action be the slow and gentle kind of a hybrid car intelligently recycling that braking energy into something useful? Or will it feel more like that of the sudden, emergency, “break glass and press”, train smash kind? Iceland calling. Let’s hope we don’t become matching salt and pepper shaker small island economies at the opposite extremities of the globe.
There is something sadly wrong with an economy where most ordinary people resort to speculation of some sort as the primary vehicle to accumulate necessary life-long personal wealth. Because of course, whilst speculation might generate apparent wealth for those that get it right, it adds nothing the real economy itself. It’s the donut effect in action. Speculation focuses on the hole, rather than the donut.
The theoretical economic model, as we seem to need reminding, is that households accumulate wealth through supplying their labour, skills, and capital to successful firms who reward them for these. Over time, the theory goes, there should be relatively less labour and more skills in the mix, resulting in higher levels of remuneration and investment reward. It’s the necessary productivity increase that economists often remind us they are looking for over the long term, but seem to struggle to find.
Productivity increases are predicated on firms progressively generating higher value products, as a result of the increased level of skills and capital provided by households. Increased volume of output for the same input of personpower could also be technically defined as productivity increase. But that just sets a market course for competition with other volume producers, who increasingly tend to be lesser developed countries. Pursuing a volume increase strategy is seldom a course for increasing developed country per capita income.
Fluctuation in world commodity prices is a major contributor to the instability in our currency. Despite our best attempts to develop added value products, New Zealand’s output is still largely in commodities. This commodity reliance is also a major reason that New Zealand’s GDP per capita struggles to climb the world rankings. Soft (renewable) commodities, like the kind New Zealand produces, tend to lose their relative value over time.
New Zealand can only be a world leader in pursuing environmental sustainability if we are financially sustainable. And we have an aweful lot of work to do there.
For a century already, New Zealand has been a world leader in biotechnology and the application of that to its land-based industries. Yields are flash and techniques are sophisticated by world standards. Countries the world over eagerly send technical missions here to glean secrets and technology.
But this stunning scientific progress hasn’t been enough to even maintain, let alone grow, our relative standard of living. In 2007 and early 2008 New Zealand enjoyed all-time record global price levels for its food products. And yet the country still couldn’t even balance its physical trade by a long way. Let alone rectify our big “imbalance of payments” given the need to pay huge levels of interest on debt and repatriate profits to offshore owners. So why continue on this exclusive “biotech is our economic nirvana” path?
A circuit- breaker is required. Something radical. Continuing to rely on incremental gains in production through biotechnology advances is just continuing the path of the last century, which hasn’t got us where we need to be. We don’t tolerate for long All Blacks players and coaches that fail to deliver the goods. Nor should we be much more patient in an economic sense. Science doesn’t appear to be able to do the required economic job alone. It needs to work in with something more.
Certainly our land & sea based industries – ie. food & beverage, wood products, tourism, and even creative (the real star of The Lord of the Rings as noted by some international observers was New Zealand’s landscape) – account for the vast majority of our economy and international earnings. This is where we must win the war.
Consider in summary our performance in the growing number of global indicators of environmental and associated lifestyle values:
| Environmental Performance Indicator (EPI) | World 7th ranking 2008, but 1st in 2006 |
| Net Ecological Footprint | In top 10 out of 150 countries |
| Peacefulness | World number 1, 2009 |
| People’s well being | World 1st equal with Denmark |
| Coolest Country | 1st in 2006 |
| Use of renewable energy | World leader |
| Trees planted per capita last 100 years | World leader |
| Presence of nuclear waste from power generation or weapons | Zero |
| Carbon position | Big opportunity for offsets, but conditional on future outlook for tree planting |
| Arresting biodiversity decline | Trying hard given our difficult starting point of a highly unique and sensitive biosphere. |
It’s an impressive report card in anyone’s book. But are we really making full use of it?
Some countries, like Australia and Canada, have natural advantage in vast mineral reserves. They exploit these to their economic advantage. Other countries, like United States, Japan, and Germany, have built competitive advantage through technology. They work hard to keep their lead and associated economic advantage. New Zealand has natural advantage in our clean and green image but has also added a lot of value to that through conscious decisions and actions discussed at length in this book. We need to work to maintain our green leadership. We also should exploit it fully for our economic development.
If we become leaders in building a pure place within a pure planet, we will grow faster and build profit
claims 42 Below founder Geoff Ross. New Zealand has the opportunity to build its Brand into something more powerful. The world wants and will pay for green. We need to accelerate our ability to provide it, and take Green Leadership in the industry categories we specialize in.
Tags: 100% Pure New Zealand, clean & green, clean & green NZ, clean and green New Zealand, clean and green NZ, currency trading, Kaitiakitanga, Kiwi dollar, New Zealand debt, NZD, productivity, yen