Alerted to the release of a new report on HB’s economic prospects, commissioned by our Regional Economic Development Agency (REDA), I read through the online version with great anticipation.
But was somewhat disappointed.
The report repeats a heap of common knowledge, but at least compiles it in one up-to-date document, useful for grounding ‘where to from here’ discussions.
It’s the ‘where to’ advice in the report that seems too constrained, too bedded in the present, and unimaginative.
I found but two new ideas, a heap of incrementalism (content with building on our existing core industries), and virtually no attention to potentially disruptive trends that might upend our current business-as-usual.
The REDA report identifies six ‘industries’ as the building blocks of the region’s economic future …
Forestry and wood processing, horticulture and related processing, meat and meat processing, food and beverage processing, machinery and equipment manufacturing, and construction. Those sectors account for 27,627 or 30% of Hawke’s Bay’s jobs and 26% of the region’s GDP.
No surprises there, and that’s OK, so long as we believe our best strategy going forward is building on the past. But is that farsighted enough in a global economy undergoing extraordinary change? Is it ambitious enough if we remain committed exclusively to sectors that produce low value goods, weighting down our regional incomes and productivity? And therefore our ability to afford our basic regional needs, let alone any grander aspirations.
I was reminded of comments Sir Graeme Avery had made for BayBuzz’s next magazine, the theme for which is ‘big ideas’: “Creation of the future is hampering economic development of Hawke’s Bay. It is afraid of Big Thinking. Tinkering with the status quo is what it prefers.”
Our current primary sector-driven economy is totally, totally dependent on export markets (to say nothing of the weather). The latest MPI Situation Outlook, also released this week (reported by BayBuzz here) projects a positive outcome for the year ending June 2025, but also makes clear that our primary sector prosperity is predominantly dependent on two economies … China and the US. Disruption in either of those markets, obviously out of our control, could be calamitous to NZ and HB.
And there will be hell to pay if we squander the ‘clean, green’ image – which we do control – that gives our food exports their critical lift in overseas markets. Yet this is where we seem headed.
Meantime, the excellent dedicated technical, engineering and manufacturing services in HB built around our food production – all of which generate higher incomes – seem to lack the scale, and perhaps in some cases the ambition, to truly cash in on the expertise they hold and their opportunities in the wider world.
The actions identified to give Hawke’s Bay a better shot at a more productive future revolve mainly around infrastructure and skills/talent development. Longstanding issues that need to be addressed regionally for any real progress to be made. However, the report is silent on whether Hawke’s Bay’s fragmented governance structure is capable of making such a unified and sustained effort – politically, intellectually or financially. Despite various mentions of pitching the Government’s Regional Investment Fund.
What needs to be done to future-ise the HB economy will take years and cost billions. How many of those billions should be devoted to trying to squeeze more out of an old economic paradigm? The report’s candidates for ‘new’ paths are information technology and digital (none of HB’s leading companies in this space have needed public largess), tourism (the lowest productivity sector mentioned in the report), and wool and textiles (at least some imagination there).
I mentioned there were two ideas in the report that might stir some excitement.
One was developing a business case for a first-class dependable road – I’d call it an umbilical cord – that tied Wairoa securely to our urban core. Presumably that case would be powered by a broad vision and plan for economic vitalization for Wairoa that fully identified its food and fibre production and tourism potential. More than the rest of Hawke’s Bay, given its isolation, Wairoa must play the hand it’s dealt.
The other is a call for a regional energy strategy. Actually, not a new idea (mooted ten years ago), but we definitely need one … and ambitiously pursued it could be a path to regional distinction, both technically and reputationally.
While that might excite readers imagining that would mean solar, wind and biomass, the report astonishingly suggests: “There may now be an opportunity to reassess the potential for oil and gas exploration in the region.” Where in the world did that come from?! The last person to recommend oil and gas for HB was Craig Foss when he was an MP. The Regional Council at the time told the then-Key Government to stuff it. At least the report concludes the discussion thusly: “However, exploration may well be inconsistent with the region’s environmental and social preferences.”
In looking to the future, I would have expected this report to address a longer time horizon, maybe twenty years, given the obstacles to address and trends to factor in. However, its ‘outlook’ discussions for each sector, as well as its discussions of strengths and weaknesses are all cast in a five-year future. Given that, it perhaps shouldn’t be a surprise that most of the recommendations are content to tweak business-as-usual.
But maybe, too bored and impatient, I’ve got it wrong, and this report will whip Hawke’s Bay into a frenzy. I hope so.
I think “whip Hawke’s Bay into a frenzy” is well into cloud cuckoo land – HB has never had much of a “frenzied” outlook – the main aim is always to stick with the past, keep being a province with fragmented councils governing a small population, and putting down anyone with ambitious ideas/businesses. Until HB gets over its prejudices and amalgamates into one cohesive unit (council) the chances of ambitious and forward thinking people making the most of our skills and natural assets are vanishingly small. Those that are doing so at present are fighting against the tide of passive and backward thinking people who are the majority here. The successes are in spite of the overall outlook – not as a result of encouragement as a natural force in this region. Pessimistic I know – but unfortunately, in the main, quite true.
Good thought provoking stuff. Agree a 20 year vision would have been more valuable for creating more innovative vision. Education wasn’t mentioned specifically in your article, but maybe it was inferred.
What drives innovation is smart young people who see opportunities. If EIT was supported to offer exceptional industry training with top class facilities and tutors, as well as a focus on academic excellence, we may see our young people staying in the region longer. As a not so young person who benefited from my training there 2010 – 2014, I was dismayed to see the courses I was taking hacked away at by government, first by National, then Labour. It was disheartening for students and tutors. Obviously since the cyclone that situation has got worse.
Tom, again you have crafted a well written piece with good insights. Of course I would suggest that little will ever change if it threatens the status quo and the property and dividend rights of those with vested interests in what is primarily a food growing area. So yes you’re right a low return environment, but yet those who own and control the process do very well with tax write offs etc, thank you, but that’s where “economic development” ends in this region. Jobs are poorly paid.
What if we looked at bolstering rail as a means of moving more goods, and removing some trucks from our roads, or even LOW COST commuter rail between say Waipuk and Bayview with car parking and connecting buses at stations, that would bolster economic development. Private capital obviously doesn’t want to cough up investment and risk their current situation, instead they prefer the state investment fund to give them a hand, then they set about minimising their tax exposures??? free ride?? The region has enormous potential for “small business” , mum n dad businesses who often have strong entrepreneurial ideas, but lack capital. Often such businesses are environmentally aware, and bring some sort of social consciousness. Maybe the state investment fund should think “small”, invest in small business, give the bankers some competition.
The world has too much potential for disruptive technology for me to think long term. This year, battery prices for electric cars have dropped in price by %53, new electric cars have car to house tech, meaning you can now use the car battery to power your house. I can see a time when power lines go the same way as copper wires. Starlink will destroy the existing cellular networks in a few years.
China is building big ports in Sth America, India is upgrading a huge port in Iran and running it for ten years, with Chinese smart port systems. China has deals with Sth America and Russia to supply it with 16 ml tonnes of grain it currently is getting from the USA/Canada/Australia. This means these countries need to find a new market for 16 million tonnes of grain or change land use. The world is awash in Wine and I talked to a grower in Marlborough and he is even worried about Savi Blanc consumption and prices. An Italian grape grower told me it’s hard to get 600 euro’s a tonne at present. Investment in Horticulture is very long term and you need much higher rates of return than at present. The industry is also heavily reliant on low cost imported labour which could become a weakness. NZ’s biggest hurdle is it’s debt and a high cost high regulatory environment. To have 5 million people and over 800 billion $ of debt is insane. Most of this debt is in housing but Business and Agriculture also have the debt and as in housing concentrated in %30 of borrowers.
Farming has been decimated by forestry/carbon, sheep numbers have collapsed and now the meat industry is due for another restructure there will be a lot of job losses. Wool volumes are so low auctions have been cancelled.
If you want growth then we need to get costs a lot lower especially energy, restructure councils, lower taxes, repurpose universities and make housing a lot more affordable. There is a commonality amongst successful economies and at present I don’t see we have much in common with them. We have a financialised system which rewards banking and finance lending to houses with a %4 .5 capital requirement, bleeding the life out of young people, paying insane rents along with student debt. It’s a tragedy.
Let’s get real
Hawkes Bay.
Exports: small amount of meat.
Small killing / freezing works
Small exporter of fruit & vegetables, wine.
Small Feeder port.
Over the top house prices and rents.
Massive council rates increases
Lots of people unemployed and or unemployable……
Only growth industry seems to be Councils Staff Numbers….
Retirement homes & fresh water restrictions…….oh an foreign owned water bottling exporters! happy daz….
Some years ago I had five fresh university graduates around my dinner table in Napier. They were the first cohort to be saddled with student loans. The conversation was terribly sad – ‘shall we just declare ourselves bankrupt’, ‘shall we go overseas to get more money?’ They were severely burdened at a time they should have been flourishing.
They did all go overseas. Three are still there, now in their mid forties, contributing brilliantly to other economies. And there’s a network of such people in Australia alone who harbour an underlying resentment towards New Zealand. I know a number of them. They are good people. Creative, visionary and productive.
Why do we do this to our brightest and most promising?
Frankly I don’t understand, and have never understood the economic philosophy of student loans. Think of what we have invested in these kids, right from before birth, and what we are losing. They are the region’s and the country’s greatest potential!
I liken it to building a beautiful home, almost finishing it, but then giving it away completely because you’re too tight to pay for the letterbox. Is there an economist who could justify that?
Maybe Hawke’s Bay could lead the country and boost its productivity simply by driving a national campaign to get rid of this stupidity.