Transcon’s Blake Noble worries about New Zealand heading for Third World status.
As I hastily pen this column, the Reserve Bank has just announced the easing of the official cash rate, an announcement that much of the population has been avidly awaiting. What 0.25% of downward movement in the OCR means to a lot of people remains a mystery. But, I’ll assume that in the same way as the hysteria that surrounds the likes of an event such as the America’s Cup, where an immense mob of closet sailing experts emerge at short notice, so, too, does the mass of closet economists who’ve emerged to take such close and keen interest in the Reserve Bank’s every step.
My above observation aside, there’s no denying that a downward movement of the OCR will provide some form of stimulus to the country, whether financial or psychological. Hopefully, it is a sign of coming attractions.
In the same week that Adrian Orr and his posse made the call, the country also received a dose of very graphic first-hand experience of how the concepts of supply and demand work within the retail and wholesale electricity market, the direct relationship between maintaining secure and stable input supply and the correlation to the viability of several large industries who rely on it for domestic and export production and earning, and ultimately domestic employment.
The fact that large-scale plants, in this case across the central and upper North Island, have had to halt production for, in some cases months, isn’t just laughable, it’s downright embarrassing, and it’s extremely hard to fathom how such a situation has been able to emerge.
Once again, transport operators are seeing this situation unfold up close and personal and are taking a hit square between the eyes, feeling the full brunt of these events; log cartage into mills grinds to a halt, sawn timber and chip cartage outbound stops, movement of bulk product in and out of chemical production facilities pauses, and so the spiral winds itself down.
It’d be convenient if we could sit back and say that some freak event had brought this about, but alas, no such luck. The scene was well and truly set when the leader of the day proclaimed, out of the blue, on 11 April 2018, that New Zealand was now putting up the ‘Closed’ sign for any oil and gas exploration. With it, the relatively hasty exodus of some large-scale efforts and enterprises focused on such endeavours.
And so, in the same way as Adrian Orr’s announcement today sets the markets’ moods and provides the direction of what comes next, so, too, did that government decision to accelerate the course we now find ourselves on: one heavily dependent on the heightened import of the same commodities we could be extracting ourselves and exporting to the world.
If ever there were an example of a ripple in one spot creating a wave in another, this is surely it. What our current state of play does for future industrial investment may not fully manifest itself for some time. Still, one thing’s for sure: energy supply has very quickly jumped the queue alongside health, education and infrastructure (to name but three) as NZ Inc’s critical elements that need sound long-term planning and strategy applied to them and urgently executed before we start sitting back and congratulating ourselves for sitting atop the rankings of the Third World.
