Fran O'Sullivan: Farmers' spirit shows way

John Key and Bill English were all smiles as they rolled up for the opening of the world's largest milk powder drier in Southland yesterday.

It was a great day to be out of the office. The sun was shining. It does that quite a bit down here, contrary to the belief of many Aucklanders.

Hundreds of dairy farmers also turned out to celebrate the latest addition to Fonterra's impressive Edendale plant. Many of them had gone into serious hock to fund dairy conversions and expansions during the heady "white gold" boom.

They tasted financial pain when global commodity prices collapsed. But the price for whole milk powder is now recovering.

Optimism and pride was writ large on their faces as they gathered to talk business and politics at what is now on track to become Fonterra's biggest New Zealand site, producing annual revenue of about $2 billion.

Key and English basked in the good vibes. Key got to unveil the plaque. It is English's fortune to be a local MP in a province which has experienced unprecedented growth on the cow's back during the global dairy boom.

But it is a moot point how each of these powerful politicians will have internalised the good vibes when they return to Wellington on Monday to continue their very serious debate on the content of the Government's fast-developing economic growth agenda.

On Tuesday Key made the cardinal political sin of over-promising and under-delivering. He promised a bold economic programme would be unveiled in his opening statement to Parliament. The plan was promising.

But it was not radical. Nor did it do full credence to the underlying Cabinet paper which sets out the growth agenda components.

A number of Cabinet ministers have been intimately involved in policies which it is said are focused on growing the "top line" - expanding promising sectors, investing in the development of new industries and furthering the internationalisation of New Zealand business.

It's a scenario which is deeply appealing to business people and investors who have an appetite for risk. Something those farmers down in Southland, who invested in dairy conversions and expansions to the point where the sector has grown 40 per cent in five years, easily get.

But insiders suggest that English had wanted to be absolutely sure he could keep the Government's revenue lines intact before signing off the plan.

In many respects English has been forced into the same position as the bank managers who funded the dairy expansion - the sour puss who has to make sure his colleagues' bright ideas and pet projects will, in fact, deliver on its promise of creating more economic growth and not drain revenue from the Government's coffers.

This is important when the Government is borrowing $250 million a week to sustain the economy.

But Key and English come from different schools. Key is a businessman, like his colleague Steven Joyce, who is rapidly stepping into Murray McCully's old role as the Cabinet strategist. Their business careers were built on an appetite for risk - not risk-aversion.

In many respects Key now has to start behaving like the country's Treasury - championing economic opportunities for New Zealand and setting aspiration levels high so that chief executives and entrepreneurs will have the confidence to expand and grow their businesses.

English comes from a different school. A former Treasury official, he is highly conscious of the Government's bottom-line and the potential for the structural fiscal deficits to be exacerbated.

He has insisted that fiscal neutrality must be uppermost during the rebalancing of the taxation platform which will see GST increased to 15 per cent to fund cuts to personal taxes and possibly company taxes.

He has insisted that Treasury rigorously cost all policies before they are included in his May 20 Budget.

In many respects he has to act as a traditional Minister of Finance, ensuring the Government's accounts pass muster with the international rating agencies and defending the integrity of the fiscal purse.

There is creative tension between the two mindsets. This is not necessarily a bad thing.

But the reality is that it will be the success or otherwise of the top-line focus that results in greater economic growth.

Talking to farmers and other Fonterra stakeholders in Southland yesterday, I got a sense they wanted to see the economy lift to the next level.

There were some grumbles around the proposed GST increase which will push up on-farm costs. But they "get" the story that it is Fonterra's success on the international scene.

This mindset must be replicated through all sorts of businesses - small and large - if we are ever to catch up with Australia. The Kiwi spirit on display in Southland inspired my confidence (at least) that this can be done.

Disclosure: Fran O'Sullivan was a guest of Fonterra during a week-long media tour of its prime New Zealand facilities.