Finance with Don Fraser Fraser Farm Finance

A recent article in the New Zealand Herald, (centre page) January 29, 2020 where Liam Dann writes his story about Dr Ganesh Nana, caught my attention.

Dr Ganesh has been appointed by the government (Grant Robertson) to chair the Productivity Commission.

Dr Ganesh is no spring chicken but comes with a lot of experience. He was inspired by Professor Bryan Philpott at Victoria University as was I at Lincoln College. Bryan was a founder of Business and Economic Research Ltd and a very wise man.

He was always on about producing something to sell and that is just what agriculture does.

We have land and people and produce we do. In fact, it comes as no surprise that agriculture is holding this country up as our product is in strong demand around the world.

A great friend of mine travelled through Sri Lanka and observed that the wealthy there were the farmers. They produced something!

House and farm

The farmers here should be wealthy too. I know it is a generalisation, but we need to produce or make something to sell to the world.

The housing market seems to dominate the news all the time, yet houses are listed on your Assets and Liability schedule as a liability! LIABILITY.

Why? Because they tie up a lot of capital and produce nothing, but because we have a billion a week flowing into the economy as the government prints more money, a lot of it has found its way into the housing market. People are therefore ‘farming’ the tax-free housing gain.

Jacinda tells us she will not let house prices drop so more money goes in as a result. Is it starving the productivity section of much needed capital?

Do we need that capital to go into the productive section? You bet we do!

New Zealand is lagging in productivity output on a world scale. Our output is dismal. Our economy is dominated by tax free gains in housing.

So, how might we increase productivity? I am sure that is the question Dr Ganesh is asking himself and that is what the government is looking for from him.

Ideas to ponder

More government involvement and encouragement

Encourage people to ‘produce something to sell’.

Broaden our understanding of the economy.

Stop the ‘race to the bottom’ by charging less for products to get a sale.

Adding value here in New Zealand before the product leaves our shores, e.g: timber.

Teach simple economics in all schools.

Halt the crazy over-investment in housing to get tax free gains.

Slow down the money printing and ensure more finds its way into the productive section.

Get the government to give some better tax breaks on research and development.

Embrace those who are producing and selling something.

New Zealand should take a longer-term view on successful economies. Have a 100-year view. Ours is just three years to the next election.

Have a national plan. How, who and when are we going to increase productivity.

So, there are some ideas to ponder. They may not all be right, but it does make you think. We need to redirect money into the productive sector to get a better economy and recovery happening.

The appointment of Dr Ganesh must be a big step forward as the government recognise the need for better productivity.

Disclaimer – these are the opinions of Don Fraser of Fraser Farm Finance.  Ay decisions made should not be based on this article alone and appropriate professional assistance should be sought.  Don Fraser is the Principal of Fraser Farm Finance and a Consultant to the farming industry.  Contact him on 021 777 675