Fundamentally New Zealand is a water economy. It's an incredibly precious resource which must be preserved and used to best long-term advantage. It's an accident of geography that New Zealand is a slither of land in a vast ocean, but it blesses us with the one resource required, in very large doses, to make the protein the world craves. Demand for meat, wool, milk, butter and all else that we grow will only rise as world living standards improve. As with all commodities, while increasing demand makes the headlines, it is supply increasing even faster that always upsets the apple cart with commodity prices. The big constraint to increasing supply is globally we have found all the water there is to find, you can't make any more (melting polar ice caps are not a preferred source), and getting it to the places it needs to be to increase supply is difficult. Even New Zealand has to consider large-scale irrigation schemes to increase production.
Data
The impact of new technologies are nearly always overestimated at the beginning and underestimated later. If there was one technology from which NZ benefits more than almost any other country, it is the internet. This is the equivalent of relocating the country in the middle of every major trade route. Physical distance matters much less if your business relies on transmitting information anywhere you need to use it. To get a glimpse into how big a deal that is, ask Sir Peter Jackson. Whole new industries which are thriving here need the internet. Think films, yacht design, and software development. This will have the equivalent impact as refrigerated shipping had when the Dunedin sailed with the first cargo of frozen meat in 1882. Suddenly, distance doesn't matter in getting our goods to new markets of consumers.
Views
I took my first plane ride aged 10, when a ticket to England cost a huge $2500, four months' salary for my father. The price hasn't gone up much, but affordability has. The effects of this are simple and powerful. As people get older and richer, they will not only travel further, but travel more often. Many will also choose to sit out the northern winter in our summer sun. NZ and Australia will become, in many ways, the Florida of the Southern Hemisphere. This has its issues, but it will bring legions of temporary, rich, well behaved and consuming residents every summer. It's a high quality problem. The impact will be the same for software entrepreneurs, designers, academics, writers, artists and many in the creative industries, who will live where they want to, because they can.
Asia
What do globally sophisticated consumers increasingly demand? Safe, high-quality food? Holidays in places with outstanding natural beauty? Friendly locals, speaking a language they can understand? Reliable infrastructure? Unique experiences? Temperate climate? Racial tolerance? Good food just like at home, maybe even better? Is this New Zealand perhaps? Absolutely. And remember, unlike the European and US middle classes that started the previous tourist boom, for the Asian middle classes it is one long-distance flight away rather than two, with two to six time zones crossed instead of eight to 12. The Asian middle class is increasing by 30 million-40 million per annum, nearly all of whom will want to visit NZ at some time.
We aren't naive optimists. Markets will go up and down, and life is tough for all of us at times. However, unlike King Canute, we should not sit and deny the rising tide of change. We need to position ourselves to benefit from these trends and sail through what we believe will be a long summer of relative prosperity. Happy New Year.
Sam Stubbs is chief executive of Tower Investments. The opinions expressed here are his own and do not represent those of Tower Investments.
