Farmers face hard times—‘Economist’

Press, 24 January 1986, Page 23

Farmers face hard times —‘Economist’

By

PETER O’HARA,

NZPA staff correspondent London New Zealand’s farmers face hard times, partly because the country has some of the highest interest rates in the world, says Britain’s influential “Economist” magazine.

“Since 1984 the woes of New Zealand’s farmers have multiplied ... things could get worse before they get better,” the publication says in a two-page feature headed “Kiwi farmers lose their crutches.”

The magazine last year applauded the economic policies being pursued by the Lange Government, but its summary of the farming industry is a gloomy one. It said 1985-86 promises to be the worst year for sheep and beef producers since the meat and wool boards started records.

“Mr David Lange’s Labour Government is partly to blame. In 1984, for the best of free-mar-ket reasons, it abolished price supports for farm produce and said that within three years all other aid to farmers

would be phased out or charged for at market rates. As big a blow to farmers was the floating of the New Zealand dollar in March, 1985.” The magazine said exporting live sheep was one answer to the industry’s problems.

But “what New Zealand’s farmers really need is the abolition of all tariffs and restrictions on imports that compete with local industries. With these disincentives removed, long-term investment in agriculture could start to pick up again.”

The “Economist” noted the Labour Government’s policy of economic deregulation had pushed up interest rates and borrowing costs.

“New Zealand now has some of the highest real interest rates in the world. Farmers’ returns on exports — paid for with foreign currencies — have slumped as the local currency has climbed. “Things could get worse before they get better,” the magazine said. “The Reagan Administration in Washington has slapped countervailing

duties on imports of New Zealand lamb.

“Relations with France have also soured since the scuttling last year of the Greenpeace ship in Auckland Harbour. The E.E.C., of which France is a member, must sell some of its butter mountain, which is six times as big as New Zealand’s annual exports of butter. This, fear New Zealanders, will depress butter prices yet further.”

The “Economist” said New Zealand’s biggest headache, however, was ’’having the bad luck to be good at producing things that consumers want less of. Consumption of beef, lamb and dairy produce is declining in western countries as health-conscious consumers switch to salads. Wool is being replaced by synthetic fibres.

“At the same time E.E.C. subsidies doled out to European farmers are causing surpluses to pile up and prices of farm produce on world markets to fall. Although it has many natural advantages in growing food, New Zealand has none in selling it.”