Tuesday, April 23, 2024

This is not a recession. It’s a reset: Bagrie

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NZ abounds in opportunities to reshape the future, economist says.
Cameron Bagrie says the air of sugar candy is going and the air of substance is coming back.
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New Zealand has landed in an economic position offering opportunities to reset, rebuild and shape the future, according to financial economist Cameron Bagrie.

Speaking at a NZ Grain and Seed Trade Association forum in Christchurch, Bagrie told farmers and industry stakeholders the impact of inflation heading current economic factors is not a recession.

“This is a reset, not recession, it is flushing the pipes back to normal after five years of shit. We now need to check the economic reality both globally and domestically.

“The bottom line is there are a lot of opportunities to shape the future from here. We are re-inventing NZ, we are rebuilding. We are not in recession; we are in a reset.”

Bagrie said the air of sugar candy is going and the air of substance is coming back.

“This journey is not going to be easy; the la-la land stuff is coming to an end.  We are in the popcorn season and we need the popcorn to pop before we can see the benefits on the other side.

“The bottom line is now one plus one equals 11. Fast-paced change is here.”

The economy is set to go through an adjustment to get rid of inflation. Firms need to invest more in technology to improve productivity and adapt to change.

Tough economic and political decisions lie ahead.

“Think of the coming years as a reset with a huge wave of opportunity to forge ahead.”

Rising interest rates will mean taking real risk to make real money.

“The fun to running a business is coming back. You get rewarded for your effort, not the markets.”

Lots of major trade-offs ahead make the path very uncertain, he said.

Numbers and fundamentals come back into play with opportunities to fix things such as banking and education, and leverage off NZ’s primary sector.

“When things break you go back to basics and the critical elements of doing things well. What do we have that is unique – our comparative advantage.

“Get the right people in place to execute a plan around that uniqueness and ruthlessly drive innovation and constant change.”

Priorities will include export markets, capital, skilled workers, innovative ideas and use of natural resources – all driving market forces and appetite for change.

“All taps get turned on that ruthlessly in the next five years in NZ,” he said.     

The return of market discipline, which will morph into cost discipline and need for change, is coming back to financial markets and going to come back to communities.

“We would need to see the current account deficit narrow over the next 12-18 months and if it doesn’t there is going to be increased pressure on AA+ rating.

“We will navigate inflation but bigger issues are structural with indicators starting to flash.

“NZ and the world are very divided. How do we bring society together? We need to bring people along on the ride.” 

Looking at the then and now, a once-globalised and connected world is now a fragmented world; low inflation and low volatility are now inflation and volatility; trending lower interest rates are now rising interest rates; the efficiency and just-in-time model is now a just-in-case model; and political leaders now populist leaders.

“When we go through tough times, we see who the people on the boards are that are the doers and in NZ and globally there will be a lot of passengers emerge.  

“I can tell you, I would rather be a farmer in the next two years than an Auckland property developer,” Bagrie said. 

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