DEAR Dana

We haven’t seen much of you in this newspaper. It has been very quiet since the presentation of the Budget, but anyhow. Maybe hiding from the backlash from not funding the cancer drugs as promised initially. (Although you will collect the funding for it from the abolishment of free prescriptions for under 65s). But not withholding that.

Thank you for the future tax rebate. For my household it will be a whopping $912 a year. I have already found the spending for it: $450 goes to the increase of my district council rates; the regional council takes another $80. My electricity retailer takes $180 each year from April 2025 and our Government takes $100 each year because I have to co-fund my medicines again. And not to forget, my car registration goes up $50 during the next two years to make sure pothole crews keep on filling up those potholes. All and all, most of my $910 tax rebate is gone.

And then there is the spin: We don’t have to borrow to fund for your tax rebate. But what is the Treasury saying: 2024 operational deficit (OBEGAL) is $11.1 billion (Nicola Willis’ first year) and the estimate for 2025, Ms Willis’ second year, will be a deficit of $13.4 billion. A whopping $2.3 billion extra the Government needs to borrow to satisfy its tax-cutting promises.

Draw your own conclusions. The Bond market has already done that. The New Zealand Government Bond tender auction number 906, of May 31, a day after the Budget, saw a 0.21 percent increase of the yield for both the 2031 and the 2034 bonds, compared with the same offerings two weeks ago. What was most worrying about the bond auction was that its cover ratio was almost 2, meaning twice the amount of dollars was offered than was necessary.

You would think with such a high level of over-offering yield would come down, but apparently overseas investors have deemed New Zealand Government debt as having a certain risk.

How about “higher for longer interest rates’’ with this kind of government borrowing. It will certainly not help with our current cost of living crisis.

The root cause of all our struggles lies in the fact that we as New Zealanders are earning not enough money to fund our lifestyles. We are living well above our means and even those means are mediocre.

The portion of exports within GDP is in a steady decline and is at a historic low of only 24 percent. Meaning the other 76 percent of our GDP is generated domestically, with our housing Ponzi scheme as the main contributor.

Double our exports within the next 10 years, I hear Prime Minister Christopher Luxon saying, but he is not telling us with what?

Shane Jones has a few ideas to increase export receipts with a couple of billion dollars through fast-track mining but that will not cut the mustard.

More bags of milk powder to China then, or more trays of kiwifruit to Europe? John Key’s main achievement was selling 11 bags of milk powder to China, but nowadays, the Chinese have figured out how they can do it by themselves, so it dropped to only eight bags and, according to a latest article in The Irish Times, it could decrease even further.

Exporting to India then? Yep, we could start selling those three bags of milk powder the Chinese don’t want, but under the bottom line we are still not earning enough because we export only low-value commodities. So, what is National’s plan?

I can share my thoughts with you. Why is the focus so much on commodities? Yes, New Zealand is a long way from markets but so are Singapore, Thailand, and many more.

And the higher value you add to that product, the lower transportation and distribution costs are in relation to the total value of that product.

Sometimes I get the impression that we are lazy and leave the value-added dairy products to be made by the Nestles and the Danones of this world.

Similar is our forestry. We are happy with selling about 60 percent of our total harvest of wood; about 23 million tonnes, for less than 0.27 NZD per kilo as unprocessed logs.

Compare that performance with Finland, which has a similar harvest but manages to extract 2.60 NZD of each kilogram they export. So, about 10 times as much as us.

This is not something I have made up, you can find it in the New Zealand Wood Fibre Futures Project – Stage 2 final main report, which was written, how ironic, by a Finland-based consultancy.

How do they do that? They see the tree as a package of cellulose, lignin and other chemical components with which you can do exciting stuff. I would like to invite you to have a look at the websites of Metsa-Serla, UPM, Stora Enso and a few others for inspiration.

One of the very few good policies the previous government produced was the Forest Industry Transformation Plan, which was based on developing similar products from trees as in Finland. Even the main contributor for the second added-value product report, Indufor, is based in Finland. So, what is not better than to hear it from the horse’s mouth.

No, the National/Act/NZ First Government kicked the whole transformation plan into touch because it was developed by Labour and I guess, without reading it.

So, Dana if the Government is looking for realistic plans, not those of a Shane Jones’ quality, to increase exports receipts, I strongly suggest digging up that policy and the underlying reports and start reading.

Peter Minten