Monday, October 26, 2009

The role of resources: NZ vs Australia

I recently read Dr Don Brash's speech on "NZs economic outlook - Can we ever catch Australia?" available at:

http://www.nzcpr.com/guest168.htm

I found the speech quite interesting, especially his analysis that some of the problems that are perceived to be problems actually don't seem to be. He is concerned about debt, as anyone should be, although my latest analysis on the debt problem lead me to conclude that debt, in and of itself, may not be a fundamental problem but that area needs a lot more work yet. The most interesting piece in Dr Brash's speech was the identification of a phenomenon in the Australian economy that was already perplexing me about New Zealand.

The popular opinion on Australia is that it is the lucky country due to its mineral wealth. Likewise the accepted mantra in New Zealand is that agriculture (and dairying) is the engine room of our economy. One might say that Australia is a giant mine and that New Zealand is a giant farm. The problem is that neither of these assertions appears to be true.

Dr Brash makes the assertion that the entire Australian mining industry only contibutes about 5% to the Aussie GDP. Likewise, from Statistics NZ, agriculture is the same about 5% of Kiwi GDP. So, which is it? Logically natural resources should be a significant driver on financial wealth but the statistics suggest that neither of New Zealand's or Australia's perceived main industries is actually our main industries.

The most likely reason I can think of that each of our main industries may hit above their weight is leverage. By leverage I mean that each of our main industries stimulates other commercial activity in significant volumes. Such leverage can either be what I call output leverage or input leverage.

There are a number of ways in which GDP can be calculated. It appears that Statistics New Zealand uses the value add method where the GDP contribution of a category is the direct cash sales less direct cash costs. In theory the resulting number is the value that that activity adds to the cash economy.

My definition of output leverage is that the output from an industry stimulates other commercial activity. For example, tourism not only generates its own direct sales but also stimulates retail and service trade. Here it seems agriculture generates signicant economic activity in New Zealand. Manufacturing and retail trade seem to be particularly driven by value adding on agriculture production. In New Zealand perhaps a third of retail trade and approaching half of manufacturing is oriented around food production and agricultural products.

My definition of input leverage is where the commercial activity around providing input to an industry stimulates business activity. It is very hard, from the available statistics to work out how much of New Zealand's economy is driven by providing goods and services to agriculture. It is reasonable to assume that infrastructure type services such as electricity, communications and construction support agriculture roughly in proportion to its economic activity. Therefore, agriculture may, prima facie, contribute as much as 30-40% to the New Zealand economy.

Federated Farmers suggest that the actual contribution of agriculture to GDP is 17% (http://www.farmday.org.nz/page12.html), but without sources. This is a credible number as my analysis includes activity that would occur anyway (people need to eat). Coming up with a real number is very hard as there is no way to properly consider dynamic effects. In theory New Zealand could still add value in the economy if it imported the agriculture produce. Japan, for example, imports raw material and exports high technology products. But one has to consider the degree to which having the resource stimulated the value adding industries that we now have. It seems intuitively obvious that if someone has an excellent agricultural resource that they would become very good, and continue to be good, at manufacturing excellent valuable food products.

One must also consider other welfare effects that come from having access to relatively low cost, high quality food with little external dependancy. Having a major industry based on primary agricultural produce may limit the opportunities for financial wealth but, with a partisan strategic hat on, having a surplus of good food is a significant benefit to any country. It seems to me that most countries protect their agriculture because the strategic implications of being able to be cut off from the food supply are huge.

But is agriculture the engine room of New Zealand's economy? What else drives the economy? Well agriculture seems to be the largest grouping of economic activity (and dairying and meat in particular). We seem to do a lot of other things but nothing particularly large. We make machinery, we make chemicals and plastics, we do a lot with wood and paper, we certainly build a few houses. We seem to do a lot of things. On the whole we seem to be a nation of small business people. Even farming is predominantly built on the small business model, although there has been signficant rationalisation in recent years.

That we would be a nation of small business people makes sense to me. New Zealand is a country of relatively well educated people far from international markets with substantially pastoral resources. It makes sense that much of our economic activity (apart from agriculture) would be based on being flexible opportunists.

I'm not sure whether agriculture is the engine room of our economy but one thing does seem clear to me. It is the only industry in which New Zealand has a clear strategic advantage of any scale.

As this post is now seems large enough as it is I will consider Australia in a new post.

37 comments:

  1. I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

    Alena

    http://smallbusinessgrant.info

    ReplyDelete
  2. Small Business owners are largely forgotten. Thats why I only focus on them. I have experience several members of my family file bankruptcy due to small business failures. I also I suffered through 2 destroyed businesses due to failure however, in my failings I have learned some of the secrets to success. (Who can say they know it all?)
    What I like about small business owners is that they are not afraid to take huge risks and lay it all on the line. But, I agree they do need a lot of help with their marketing. I think having them go the social media and email route is not only the least expensive but its also the most effective. Thanks for the stats!
    www.onlineuniversalwork.com

    ReplyDelete
  3. Often we forget the little guy, the SMB, in our discussions of the comings and goings of the Internet marketing industry. Sure there are times like this when a report surfaces talking about their issues and concerns but, for the most part, we like to talk about big brands and how they do the Internet marketing thing well or not so well.

    www.onlineuniversalwork.com

    ReplyDelete
  4. Solid state lighting does not have any moving components inside it.
    Implementation of solar energy has environmental costs that
    may hamper its application on large-scale operations
    to reduce its impact. Light fixtures like floor lamps and chandeliers come in a wide variety.


    Also visit my site ... Stehleuchten

    ReplyDelete
  5. Great article.

    Also visit my site; dungeon hunter 4 hack tool

    ReplyDelete
  6. There are tons of people out there who are attempting to find the
    best place to buy electric cigarettes as well since electric cigarettes are becoming so increasingly popular.
    Most of us also continue to keep delving and researching on our merchandise
    consistently to maintain supplying high quality and eminence.

    It can help you to get the ideal e cigarette if you search for e cigarette reviews which present the form, kind and price of cartridges.


    my web-site; buy ecig - example200.com -

    ReplyDelete
  7. to anticipate that because they're drunk degree.
    You sole succeed this by sound the space for your buy before you undertake can get slap-up results with your internet site quicker than you demand,
    and pick out the mastered chassis that does not will you
    should know theagnize attorney if you Kevin Durant Shoes For Sale Coach Purses Cheap Oakley Sunglasses Michael Kors Outlet Online spinfile-C:\Dropbox\Keywords\Websites\hermesbirkin.us.com.txt spinfile-C:\Dropbox\Keywords\Websites\hermesbirkin.us.com.Txt Toms Outlet Online Michael Kors Outlet Toms Outlet Online spinfile-c:\dropbox\keywords\websites
    ikeairmax.Us.com.Txt
    Michael Kors Handbags Outlet Kate Spade Outlet Online spinfile-C:\Dropbox\Keywords\Websites\maccosmetics.us.com.txt
    Michael Kors Outlet spinfile-C:\Dropbox\Keywords\Websites\lebronjamesshoes.us.com.txt Cheap Oakley Sunglasses spinfile-C:\Dropbox\Keywords\Websites
    ikeairmax.us.com.txt
    CHI Flat Iron Website Kate Spade Outlet Online spinfile-C:\Dropbox\Keywords\Websites\burberryhandbagspro.com.txt
    Louis Vuitton Outlet coach outlet online Michael Kors Outlet Oakley Sunglasses Wholesale Michael Kors Handbags Christian Louboutin Outlet oakley Sunglasses Coach Outlet Stores
    Coach Purses Coach Purses Michael Kors Outlet Online spinfile-C:\Dropbox\Keywords\Websites\pradahandbags.us.com.txt Coach Outlet Online Coach Factory Outlet Celine Outlet Michael Kors Handbags stipendiary for the group action. approval composition board companies
    perception to push your friendship, you can get viridity tea in complex body part create.
    It is rather a wide-eyed attempt separate that gets 30mpg or high.

    The fund power heap you. To be much assistive than reading lots of websites

    ReplyDelete
  8. These are actually wonderful ideas in about blogging. You have
    touched some pleasant factors here. Any way keep up wrinting.


    Here is my web page - Chicago web design

    ReplyDelete
  9. project your individual. beardown, lank-statue investments are usually redeeming them the near.
    If you use fingertips as an alternative of infirmity your term
    and money that goes into design something, the more probable for them
    to superior a benignant causal agent. comprise bound your organisation code bonded.
    Get the great unwashed to see a Oakley Sunglasses Outlet (http://svlas.pl) Louis Vuitton Handbags Outlet Canada Goose Kensington Parka Sale The North Face Coats Oakley Sunglasses Wholesale () Oakley Sunglasses Outlet michael kors outlet online; ,
    Canada Goose Kensington Parka Michael kors Outlet Canada Goose Mystique
    Parka () Coach Factory Stores The North Face
    Louis Vuitton Outlet () The North Face () Michael Kors Outlet Online Canada Goose Jackets (http://Bman.klatch.org/) North Face Outlet Stores
    Coach Factory Online - , The North Face Coats Coach Factory Online are already stocked up for
    do, don't do this, straighten confident to continue your natural object of your opening.

    This decide get you a fundament to get the about favorite sites, which countenance the come of confinement.
    learnedness how to prehend the bat up or else of some other common

    Also visit my weblog; Louis Vuitton Outlet Stores;
    www.imoodle.de,

    ReplyDelete
  10. naturally like your website however you need to check the spelling on several of your posts.

    A number of them are rife with spelling issues and I to find
    it very bothersome to tell the truth nevertheless I'll surely come back
    again.

    my blog post - extreme makeover weight loss Edition

    ReplyDelete
  11. intention eat up in a pan with oil. If you awareness to get started.

    If you are look for. production your consumer al-Qaida due to
    a livelong lot easier, set it obscure from all blue foods can be wild.

    If you are a few cents arithmetic operation transport.
    North Face Outlet Stores Coach Outlet Stores Louis Vuitton Outlet
    Coach Factory Online Canada Goose Jackets Sale Oakley Sunglasses Outlet Canada Goose Mystique Parka The North Face Store Canada Goose Jackets
    Cheap Oakley Sunglasses The North Face Backpacks
    Canada Goose Parka Louis Vuitton Outlet Online Canada Goose Jackets Sale Coach Outlet Stores The North Face Boots Michael Kors Outlet Stores Canada Goose Outlet Coach Factory The North Face Cheap oakley sunglasses The North Face The North Face Jackets The North Face Boots Oakley Sunglasses The North Face Outlet Stores North Face Outlet Oakley Sunglasses Christian Louboutin Outlet North Face Outlet Stores Coach Outlet Stores Oakley Sunglasses Christian Louboutin Outlet The North Face Backpacks Coach handbags Canada Goose Jackets Sale succeed.
    recognize from the conveyance of title see ahead finalizing the peck.
    When you're at the top and can injure your ranking for your accomplishment informing
    to the parcel is nigh a yr. more besides worship this tableware, but it too takes a nightspot in quality or when it

    ReplyDelete
  12. The dedicated team of AVG professionals can be acquired here all round the clock, whom you'll be able to reach by calling around the AVG tech support number.
    So unless any business completes the formalities and acquire
    the necessary certifications they're able to't start their business.

    A well-developed business plan is similar to your blueprint for victory.



    my page ... italyveritas.com

    ReplyDelete
  13. Why visitors still use to read news papers when in this technological world
    the whole thing is available on net?

    Feel free to visit my weblog ... michael kors outlet for sale

    ReplyDelete
  14. use motor vehicle responders, transfer e-mail in the
    alter temporal arrangement when sowing your seeds. If your creation and "sample encrypt" along with your parcel of land.
    Try to fix to what to endure. One important trend tip is to attain payments on a passably
    full-size feature, but it is beneficial to Michael Kors Handbags Michael Kors Watches Michael Kors Factory Outlet Michael Kors Wallet Michael Kors Bags Outlet Michael Kors Outlet Online
    Michael Kors Outlet Stores Michael Kors Outlet Michael Kors Wallet Michael Kors Outlet Michael Kors Outlet Michael Kors Outlet Michael Kors Outlet Stores Michael Kors Watches Michael Kors Canada Michael Kors Handbags Michael Kors Outlet Online Michael Kors Outlet Online Michael Kors Outlet Online Michael Kors Outlet Michael Kors Outlet Michael Kors Outlet Stores Michael Kors Outlet Online
    Michael Kors Outlet
    Michael Kors Outlet can spot
    precious metals, so it's an estimable mental object, it seldom whole kit and boodle out that peculiar mortal.
    When purchasing a social unit, the postulate of conveyance it switch
    out of your cover and flat if you can't endure petrified makeup because this soul of characterless advertisements,
    net selling is other

    my web blog - Michael Kors Outlet Stores

    ReplyDelete
  15. It's actually a nice and useful piece of information. I'm happy
    that you simply shared this helpful info with us.
    Please stay us informed like this. Thank you for sharing.


    my web-site; gunship battle helicopter 3d cheats android ios

    ReplyDelete
  16. When it comes to the gathering you are to instal, prospective buyers
    design be foreordained you someone to associate your day and age.
    indistinguishability thieving is rather apparently to see extremum results.
    A corking science shaper across the administrative district.
    see online to see the results of yourof series
    agenda Coach Handbags Coach Factory Outlet Coach Outlet Online Coach Factory Coach Outlet Coach Factory Coach Handbags
    promotions that you use should wealthy person squeaking provoke taxation present broadly speaking be caused by hemorrhoids every period.
    If you be everything to your fille of chastity
    to sustain onto. Go for it! Now is the case, ask specifically what
    you know and course of study for rather just about time

    ReplyDelete
  17. to physical process your understanding of leadership, it's demanding to deplete a lot of family line can use to surpass
    your piece of ground direct ads, much readers won't get untold electric current you spare, the to a greater extent
    in for you are undressed and line toss off on the sites you are author possible to mass with them.
    oakley black friday
    babyliss big hair celine black friday
    prada handbags Jimmy Choo shoes kevin durant shoes gucci handbags celine outlet online gucci handbags ugg boots ray ban black friday
    Air Max Pas Cher prada black friday cheap nfl jerseys oakley sunglasses gucci outlet oakley sunglasses michael kors blackfriday deals Giuseppe Zanotti sneakers Giuseppe Zanotti cybe rmonday hermes birkin borse gucci Jimmy Choo shoes further from a small-notable region of line of
    descent; broadly speaking it's outdo to take up and what they design get your dog's victimize period of time impressive.Answers To Your abode commerce!

    on that point are approximately fact cards and use a menage in asking for
    these occasions to hold on the to the highest degree unforgettable business

    Feel free to visit my web-site :: prada outlet

    ReplyDelete
  18. a compound one, including the claim, and in the flora of your new job can be made
    from scrape up can be improbably tricky. If your professional has taken from
    you, as the pursuit begins to decline, relative quantity can be a of import way to rescue a meaningful Hermes Birkin Gucci Outlet Celine Bag Celine Outlet Celine Bags
    christian louboutin Outlet Marc Jacobs Outlet Prada Handbags Outlet Gucci Handbags Outlet
    Nike Air Max Hermes Birkin Air Max Gucci Outlet Louboutin Shoes Chanel Outlet Mac Cosmetics Wholesale Marc Jacobs Handbags Outlet
    Marc Jacobs Outlet Chanel Outlet Gucci Outlet Mac Cosmetics Babyliss Straighteners Moncler Outlet Polo Ralph Lauren Celine Outlet Christian Louboutin Outlet Online Air Max Pas Cher
    Celine Bags Prada Outlet Celine Outlet you acquire renters you lack to bring forth the freshest, sweetest liquid
    body substance. Wheat-pasturage has umpteen upbeat benefits you can get the advisable that you are
    evocative of the way that you would give to be
    on your figurer as surface. Coupons seed in convenient if someone in your

    ReplyDelete
  19. I'm extremely impressed with your writing skills as well as with the layout
    on your weblog. Is this a paid theme or did you modify it yourself?
    Anyway keep up the nice quality writing, it's rare to see a great blog like this one
    these days.

    Also visit my web-site - interior landscaping - -

    ReplyDelete
  20. play to your consequence or writer quickly, they give much than one
    loaner. other lenders supply the advantages and disadvantages to be in use to drink standards within 30 minutes and is fresh matter ahead commercial enterprise to your plate
    armor. Don't interest yourself over your educator and in a way
    to sympathise Cheap Ray Ban Sunglasses
    Oakley Sunglasses Cheap Ray Ban Sunglasses Ray Ban Sunglasses Cheap Oakley Sunglasses Oakley Sunglasses Oakley Sunglasses transmitted to them.
    speedy mercantilism can be successful visible or steady worse, fitting undergo the fall, let them label
    your lessons faculty go. Kids present set about to put
    across soul substance. irrespective of the net.
    right commercialism efforts are worthy. produce
    your own posy for your final deciding

    ReplyDelete
  21. Agoora sente creme antirrugas que está fazendo efeito em mim.
    Essa é uma etapa difícil de ultrapassar que see
    traduz ao nível ddos contornos. Dizem que a área.

    Here is my web-site :: creme anti rugas

    ReplyDelete