Only Fools and Horses . . .

When Our Leaders are Smarter than the Average Bear

We are old enough to remember with painful clarity the control economy of Robert Muldoon. Rob was a man with a few smart ideas, just like the current crop of clever folk in Wellington. He knew that the New Zealand balance of payments was precarious, to say the least. Exports were the trick, and that meant stimulating the New Zealand agricultural sector, along with a few other "Think Big" projects, mainly to reduce our reliance upon overseas fossil fuels. One major project was the supplementary minimum price scheme for agricultural produce. This artificially government subsidised price meant that thousands upon thousands of hectares of scrubland was converted to farms--which were indeed economically viable provided the taxpayer remained the backbone of the farming community. It worked for a time. Not a few farmers got rich as a result--until the whole crazy scheme collapsed.

Now, the worm has turned, and the same National Party that smart Rob led once again governs in New Zealand. Today's crop, just like Rob, are full of smart ideas to get the New Zealand economy right. Central is the much vaunted ETS--our Emissions Trading Scheme--designed to protect our access to international markets for our agricultural produce.

We make the following predictions about the actual effects of this mad hatter's scheme:

1. Agricultural production will decline.
2. Smart farmers will get rich off the back of the taxpayer.
3. An increasing acerage of rural land will go back to scrub.
4. Our free-trade agreements will break down. Instead of enhancing international trade, the ETS will destroy it.
5. Thousands of jobs in the rural sector will be lost.
6. Within two decades New Zealand will be importing dairy and meat from overseas.

The following article which was published in The New Zealand Farmers Weekly (August 2, 2010) explains why the ETS will undermine and weaken New Zealand agriculture.

How can smart people be so dumb?

South Canterbury farmer Murray Harmer is among those struggling with the concept of an Emissions Trading Scheme.

I am a 100% believer in climate change but I’m not naive enough to think that it’s all man-made. I guess that puts me firmly in the camp of the sceptics. So it never ceases to amaze me how some seemingly intelligent people (ie, John Key, David Carter,Nick Smith) can make some extremely dumb decisions - that is the proposed ETS.

In case they haven’t worked it out yet New Zealand farmers are very responsive to market signals - just look at the conversion to dairy over the last 10 years. So when you subsidise one sector (forestry) and penalise another (livestock farming) you are likely to create massive distortion.

There also seems to be a very interesting play on words from the powers that be in the form of the word mitigate. In reality this is just a disguise for the word subsidy.

When I contacted Landcare Research to find out what our unsubsidised carbon liability would be under this ETS they informed me it would be approximately $45,000 a year at a carbon price of $15/tonne. John Key tells us that the average sheep/beef farmer will “only have to pay $3000 pa.” So this must mean that we will be “mitigated” (subsidised) to the tune of $42,000 a year.

Now, it’s not going to take very long for our trading partners to work this out, which could not only put our free trade agreements in jeopardy but will provide an opportunity for countries like Japan, Korea, Europe, UK and US to apply significant tariffs at point of sale for our produce as America did to our lamb in 2002.

David Carter tells us that it is economically viable to plant our less productive areas in trees and claim the carbon credits. If we assume these areas are now carrying only about 5su/ha at a carbon price of $15, does this also mean that if the carbon price doubles to $30/tonne it is economic to convert land that is carrying 10su/ha to forestry? About 90% of sheep and beef properties would fall into this category.

I made a recent inquiry to one of the forestry carbon companies to find out the viability of planting forestry. The information I received was that depending on what part of NZ you lived in you could earn about $425 net/ha/year for the first 10 years rising to about $800 after that. Remember this is money paid for producing nothing and doing nothing so provided you don’t harvest these trees you get to keep the lot.

With the average age of sheep and beef farmers being 58 this looks like a very good retirement plan. With sheep and beef farmers’ incomes being very marginal about $200-$400/ha net or less it could be conceivable that these farmers seize on this and plant trees en masse. For a start, if we plant our farm in pines and become carbon farmers we will be $45,000 better off for doing nothing and producing nothing instead of producing food and clothing for the urban population (dumb).

So let’s look at what might happen. First the farmer with his farm now completely planted in pines would become a carbon farmer with a monthly income for the next 30/40 years. Of course, they would still have a few feral cattle /sheep/pigs/ deer running around in their pine plantation for table purposes. And because they are “feral” they don’t produce methane and they aren’t penalised under the ETS - just as our thousands of trees planted in shelterbelts don’t need carbon dioxide to survive - or so the writers of the ETS seem to think.

Now that we have disposed of these so called polluting sheep/beef and deer from our land along with them go about $10 billion of overseas income and about 150,000 urban jobs. So what are these jobs to be axed: shearers, shed hands, 60% of stock agents, 50% of merchandise employees, 75% of freezing workers, 75% of transport operators, 50% of fertiliser workers, Meat and Wool NZ,50% of machinery sales and service workers, 50% of animal health workers, 25% of accountants, 50% of MAF, 50% of Massey and Lincoln
staff, 50% of AgResearch staff and scientists, 50% of veterinarians, 40% of animal health product manufacturing staff, 50% of farm advisors and staff and many more too numerous to count.

I would also suggest anyone involved in these industries will have good reason to be very nervous. As we see, those scruffy sheep and beef animals not only provide huge amounts of food but also provide thousands of jobs for ordinary NZers. As for the tourist industry, I don’t think we will get many tourists travelling 20,000km to drive through huge pine forests interspaced by a few dairy farms so we can expect a hit here too.

In summary Key, Carter and Smith have literally “dropped” us into a scheme that is likely to spiral out of control with far reaching consequences for all NZers. One of the first signs will be a downgrade in NZ’s credit rating followed by a significant lift in interest rates.