Driving the economy
Bottomless money pit is a thing of the past Leading economist Cameron Bagrie addresses Transporting New Zealand’s Road Ahead Conference.
I by Nick Leggett Chief Executive Ia Ara Aotearoa Transporting New Zealand
A ARA AOTEAROA TRANSPORTING NEW Zealand members will by now be familiar with Cameron Bagrie’s style of economic analysis. Bagrie is a trusted voice amongst the endless noise of economic and political commentators, which is why over a number of years we have trusted him to provide sound advice to our industry. At the recent Road Ahead Conference in Invercargill Bagrie provided some typically hard-headed analysis of the state of the economy, where it is heading and the type of environment our businesses will be operating in. After a long period of market resilience, the old laws of economics are back in play, he told the Conference. If you print a whole lot of money, the Government spends a lot of money and you get a supply shock you unleash the thief that is inflation. Most of our workforce has yet to see the destructive impact of inflation because they are all under 50 and it is going to be tough for some. The good news is that this means business is fun again. Not everyone will make money. Businesses will have to be good to succeed in a tough market and it will be all about market share – “who can rip the throat out of the competition,” as Bagrie put it. The advice for businesses is to learn again to take risk. Doing things the same old way they always have been done, will not guarantee success, and will actually expose a business to having disruption inflicted upon them by competitors or a
changing market. The weak will get eliminated. As a country we can no longer rely on ever-increasing property prices. What only a year or two ago were low-risk investments are now high-risk. “So perhaps New Zealanders need to invest in real productive assets and banks need to change their culture and invest into the real productive part of New Zealand,” he suggests. Bagrie was also extremely critical of the current generation of global political leaders and their response to the changing global economy. The recent budget package released by Liz Truss’ Conservative Government in the UK came in for a particularly unfavourable review, and when you look at what has happened to the pound since, it’s hard to argue with that. Divisive tax cuts that primarily benefit the wealthiest individuals (some of which have since been backed away from) along with massive spending to help offset the rise in energy prices is incredibly irresponsible at a time where hard-headed economic orthodoxy is the order of the day. “The days of the bottomless pit in terms of money is over,” Bagrie said. “Now, economic reality is starting to sink in. Now, we need substance to decision-making, not politicians spraying money or tax cuts around like confetti…The old laws of economics are back.” Looking at the significant issues for New Zealand, Bagrie emphasised the weakness of many of our economic and Truck & Driver | 41
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