A visiting energy and finance expert says New Zealand needs a "plan B" for when dairy exports are no longer able to sustain the economy.
Nicole Foss, senior editor of website The Automatic Earth, is currently touring New Zealand, speaking about sustainability, peak oil and the global financial crisis, which she says is yet to truly peak.
"2008 was a warning shot across the bow, nothing more than that," she said on Firstline this morning.
"It's going to be worse this time – we're on the verge of moving into phase two of the credit crunch. Australia and New Zealand were somewhat insulated last time, but are probably are not going to be so lucky this time."
The crisis hit a number of countries in Europe hard, and some – think Cyprus, Spain and Greece – are yet to recover.
"Look at what's happening right now in the European periphery, because that's where a lot of other countries are going," says Ms Foss.
"Somewhere like Cyprus, in one week the banks closed, the ATMS were empty, the store shelves were empty, it's a cash-only economy. In one week, that's what can happen when you have a systemic banking crisis."
A similar fate awaits New Zealand if we continue to rely on dairy exports, says Ms Foss.
"When the ability to import and export is impacted – which it will be as soon as the letters of credit start to disappear as you move into global financial crisis – import and export won't work. So if that's your model, and you have nothing to back it up – no plan B – then you can end up in trouble very quickly."
- VIDEO: Nicole Foss on Firstline
The world's recent economic woes have come about because of "an enormous accumulation of debt over 30 years in the era of globalisation, to the point where the debt is a vast multiple of global GDP", says Ms Foss, who recommends economies become more self-sufficient and detached.
"Countries need to look at their own resource base, and look at how they can live within that resource base so they have fewer external dependencies," she says.
"There's an enormous amount of resources here. You're not overpopulated like so many places are, so the resource base and the population are in quite reasonable balance."
In 2010, a report commissioned by Fonterra said dairy made up 26 percent of all New Zealand exports, and was directly responsible for 2.8 percent of GDP, indirectly contributed much more.
3 News
source: newshub archive
