The Country 10/03/25: Pita Alexander talks to Jamie Mackay

Christchurch-based farm accountant says the next four years are going to be disruptive for the world economy and that farm profitability for sheep farmers needs to improve over and above this season's lift.

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Episode Transcript

Speaker 1 (00:00):
Here's a Christchurch farm accountant. His name is Peter Alexander Peter.
I always tell this story and people accuse me of
repeating myself, even some of my close friends. But a
good story is worth repeating. When I was a kid
growing up in the sixties and Riversdale and Southland on
the farm, my uncle, my late uncle and my late
father used to ring each other up at lunchtime because

(00:21):
they kind of farmed in partnership, and the start of
the conversation would always be the same, no doubt about it.
The country's bugget. Do you think anything's changed in the
last sixty years.

Speaker 2 (00:32):
Ah, that's a good analogy, isn't it. I think it's
been up and down. It's been up and down right now.
It's messy. When you read The Economist, which I do
every week tilS and there's some very good articles in it.
They are struggling to find much joy in the next

(00:55):
three or four years.

Speaker 1 (00:57):
Okay, well the next that coincides with the rest of
the Trump term. And he's been a very disruptive president
so far. He probably has done some good things as well.
But from a trading point of view, we are a
trading nation, no matter which way you slice and dice
it up. He's not good for us.

Speaker 2 (01:14):
No, he's not. I mean we have a a He
has a deficit with us trading wise, it's not a
big deficit, about three billion. He actually is the other
wave of Australia. So Australia is not facing any tariffs
at least on his present way of looking at it,
whereas we might have a tariff. Had to know how much.

(01:37):
Could be three hundred million, could be six hundred million,
depending on where.

Speaker 1 (01:41):
But Peter, at this stage, I mean, this is all hypothetical,
but we don't know whether we would impose a reciprocal
tariff back on the States if they put one on us,
so it could be a one way street.

Speaker 2 (01:53):
Yes, I'm just working on the net balance. At the moment.
We export about fourteen point six billion to America and
they explore to US about eleven point four billion, so
there's a iven balance of past three point two billion,
which is pretty small potatoes on his side. Yeah.

Speaker 1 (02:10):
Well, I think we're also a valuable ally, and as
I've been fond of saying, I think we may be
able to coattail off Australia if they can do with
a deal with do a deal with them, because they
have a very close relationship with the US. Of course,
Trump not only affects trade. What he is doing will
affect inflation in the US, which ultimately effects inflation and

(02:34):
interest rates around the world.

Speaker 2 (02:36):
Yes, I believe that our interest rates will drop a
bit further, but the way I mean inflation is written
all over what Trump is wanting to do, and that
will have any effect of increasing in interest rates. So
we could see interest rates drop here further and then
in twelve months time start to rise again. It's not
an unrealistic expectation.

Speaker 1 (02:58):
Yeah, and that's what a lot what economists are saying.
So should you go in and lock in a good
fixed rate, a longer term fixed rate right now?

Speaker 2 (03:08):
That's a good question at the moment. I've got to
be keptle while I write, otherwise people will assume me.
But personally I think a fixed rate maybe four point
five four point seven five for five years, would be
well worth looking at. It might it may go lower,
but don't hope for the fixing at the lowest rate.

(03:29):
Fix at a rate that's very workable for you for
five years.

Speaker 1 (03:33):
It's the old sleep at night test. If you can
make it work at those levels, grab it in use
and then you can rest easily for five years now.
News out last week from Beef and Lamb New Zealand
on their mid season update. An interesting number for me
was the average farm profit for sheep and beef farmers
at one hundred and six thousand, five hundred. It doubled

(03:54):
from last year. But from that, Peter, and you're the accountant,
you've got to pay your drawings at tax capital expend
that's your principal repayments. It's not that much. In fact,
there's bi grell spare fat in the system.

Speaker 2 (04:08):
No, you're quite right. There's five two hundred viable sheep
and beef farmers in this country. There's a lot more
than that that survival number that's referred to. I think
probably half of them in the previous year made losses.
At the moment, that one hundred and six thousand a
big number, will balance their cash flow. But to really

(04:29):
make any progress at all, they need a profit another
fifty thousand dollars higher than that. The average personal drawings
they're all over the place, but that the average personal
drawings when you allow up for life insurance, all sorts
of other things, is up near ninety thousand now for
a lot of sheep and beef operations there's an enormous variation,

(04:49):
but even at one hundred and six thousand, the sheep
and beef sector will be paying very little in the
wave of income tax.

Speaker 1 (04:56):
Well absolutely, if you're spending ninety on drawings and you'
you had one hundred and six profit, that doesn't allow
anything much for tax capital expend that you're not going
to spend much there in principal repayments. How many of
your sheep and beef farming clients are on, for instance,
interest only, there.

Speaker 2 (05:15):
Would still be quite a number. The banks, as you know,
have been pushing back for a table mortgage structure. That
most of our banks, which we remember eighty five percent
of our metsure Australia asking for two percent of things
are going well. If things aren't going well, they wouldn't
they don't push for it, but by choice they want
to see about two percent a year coming back and

(05:37):
loan principle.

Speaker 1 (05:38):
Peter Alexander, christ Church Farm Accountant, thank you as always
for your time on the country. Really appreciate it. You
have a great week in christ Church.

Speaker 2 (05:47):
Thanks Jamie