NZ needs to play its part in solving food security issues, Citi bank boss says

Julie Monaco, Citi’s global head of public sector group.

New Zealand is in a good position compared to many other countries coming out of the pandemic but still has work to do solving global food security issues, says a top banker who oversees a global team advising governments.

Julie Monaco, Citi’s global head of public sector group, was in New Zealand for a flying visit this week to see finance minister Grant Robertson and other government officials before heading to Australia.

Monaco, who has been coming to New Zealand for more than 10 years in an advisory role to the Government, was back for the first time since 2019. She was due to come in early 2020 but had to put off the trip when borders closed.

She said the biggest shared challenge New Zealand and the world faced was trying to deal with inflation and how to manage inflation in a way that doesn’t drive the global economy into a recession.

“That is certainly a big challenge that most governments are looking at.”

Monaco said the start of Russia’s war on Ukraine had changed the focus of 2022.

“Prior to that we were coming out of 2021 thinking: Okay, we are moving into recovery mode and there was concern about inflation and thinking about lessons learned from the pandemic - was the fiscal support targeted enough? Was it delivered efficiently enough? What could we do better next time to prepare ourselves for the next pandemic?”

Monaco said because the pandemic was an emergency, many countries erred on the side of quickness by giving financial support to make sure people didn’t feel a lot of pain.

But in hindsight many had realised there were some gaps in digital capabilities, data and information that would have allowed them to do that in a more targeted way.

“That’s common around the world.”

Monaco said after the war broke out, the world suddenly became very focused on energy and food security.

“And that energy security and food security, given the geopolitical backdrop, has turned into governments really myopically focusing not only on energy and food security but energy and food independence.”

While New Zealand produced a lot of its own food it had inflation because of the open nature of the economy. And that meant global prices had an impact on how much New Zealanders paid.

“So being part of that overall solution around food security will be important for NZ. I think NZ can play an important policy as well as an innovation role given the important role you play in food production. NZ certainly needs to be at the table where those issues are being looked at. "

After Australia, Monaco will head to the COP27 conference in Egypt where said an entire day would be devoted to food security.

She said New Zealand had done a lot of work in the past exporting knowledge around food production to some of its trading partners.

Monaco also pointed to New Zealand’s climate action plan.

“Every country has its own unique challenges. Some of it is tied to the agriculture space. There is cross-over between net carbon neutral and the agricultural space.”

She expected talk at the conference would be around how to increase food production in a sustainable way.

“I think that NZ has a really important role to play there. You have got such a strong industry, you have got strong science and tech and research here and you can bring that to the world and be a major player and major participant in policy solutions that everyone will be looking for on global stage.”

Asked what New Zealand could be doing better, Monaco said New Zealand’s government debt level was not high internationally. “I think that New Zealand comes out of the pandemic in a better position debt-wise.

“We started 2022 with the highest sovereign debt to GDP ratio the world has seen since the end of World War II.

“And so although New Zealand, like every other sovereign, has come out of the pandemic with a higher debt to GDP ratio it’s certainly is within a manageable level. And I think it’s an area where they have managed it well. That’s not an area of concern.”

“I have 50 clients that have lost access to the capital markets because their debt sustainability is not quite where it needs to be. We certainly have a big emerging market challenge going on around the world.”

Monaco said one focus of her visit will be how New Zealand plans to manage inflation - a big challenge every government faced.

She said the labour market was very tight in New Zealand.

“It’s not so much what New Zealand can do better but certainly there is a challenge around what NZ is going to do about employment in the tight labour force. When I talk to governments around the world they are all struggling with labour force issues in the developed countries.”

Monaco said that was caused by factors including people going home during the pandemic and not coming back, and some workers retiring early or taking care of sick family members.

“There is just a whole lot of reasons why in the developed markets there is this very tight labour force.”

She said NZ, like the US, was struggling to fill job openings in services, making it hard for economies like New Zealand where services and tourism were big parts of the economy.

“We have the same issue going on in the US and in other western European countries as well. That’s going to be an immigration issue and an immigration policy issue that countries are going to have to deal with in order to fill those positions.”

Monaco said there was no easy fix to getting inflation down.

“Raising rates is really the main way to get inflation down but it also comes down to the availability of labour, the flexibility of the labour market and innovation long-term to drive down costs in the supply chain again.”

It was hard to predict how long inflation would stay high, she said.

“But there are certainly views out there that interest rates are going to have to go much higher than what people are projecting to get it under control.

“We are in an unprecedented time from a monetary policy standpoint in that it’s a trillion dollars and there is the unwinding of the G7 balance sheets that are happening. So it’s not just the raising of rates, it’s the reduction of liquidity in the market and it’s so hard to say one overall comment because all of this is impacting countries very differently.

“I think NZ is in a good position compared to a lot of other places. Not that there are not challenges out there but nothing that is going to derail the economy. It may slow down some of the growth potential but not derail the economy the way other countries have to face right now.”