Farming skill shortage dragging economy down - bank

By NZPA

Thursday 5th September 2002

The difficulty in attracting and keeping skilled labour, especially rural workers, is dragging the economy down, WestpacTrust says.

In its quarterly rural economic review, the bank says next year's farm gate income should compare favourably to most of the 1990s.

But it also warns that New Zealand is now well past its `best-by' date in terms of economic growth, with the lacklustre global scene, lower commodity prices, and a higher currency and interest rates all dragging on momentum.

Westpac has revised down its growth prospects for the New Zealand economy from over 3 percent to 2.5 percent.

Westpac economist Richard Sullivan was predicting only a gradual improvement in commodity prices as the global economy slowly recovered but it would be offset by a parallel rise in the New Zealand dollar.

With unemployment at a 14-year low, Mr Sullivan said the resulting skill shortage was being felt particularly keenly in rural regions.

He felt the long-term drift of labour away from rural centres was due to three things: a rural-urban wage gap; social reasons such as more opportunities in bigger centres; and the fact that most of the rewards were going mainly to the owners of the land and stock.

"Despite the recent high levels of profitability in the farming industry, it has failed to attract workers and the average age of farmers continues to rise."

Entry costs were high and a higher level of skills needed for farming appeared to have gone unrecognised. Mr Sullivan suggested farmers needed to boost farm wages and find innovative ways of sharing their wealth.

"Farmers globally have never been famous for crowing about their personal wealth creation. This modesty may need to change if people are to be attracted to the industry."

Elsewhere in the economy, Mr Sullivan said there were still plenty of positives including good employment growth, rising real wages, relatively low interest rates and strong immigration and tourism flows.

But exports were tailing off, growth rates were easing for retail sales, business confidence was down and house sales also appeared to be slowing, although prices and construction continued to grow.

This was why WestpacTrust believed the Reserve Bank was likely to leave interest rates on hold at 5.75 percent for the rest of the year.

"The balance of risks for the next OCR (official cash rate) move is still up, but not before early 2003 and not without doubt," said chief economist Adrian Orr.

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