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The Bulletin: Fonterra’s back to basics strategy pays dividends

Good morning and welcome to The Bulletin. In today’s edition: Fonterra gets back into the black, National’s economic plan derailed by accounting blunder, and Air NZ boss questions continuing with elimination strategy.

To lead off today, one of the most important single numbers for the rural economy. Fonterra has announced a payout for the season of $7.19 per kg of milk solids for all fully share-backed farmers, who own the cooperative. That is the fourth best price ever achieved in Fonterra’s history, reports Stuff’s John Anthony, and includes a return to paying out dividends of 5c a share. This is at the lower end of the dividend range, but still marks a return to paying dividends, which had to be suspended when the cooperative slumped in previous years. The NZ Herald’s (paywalled) Jamie Gray reports that more asset sales are likely, including businesses in China and Brazil.

How has the return to profit been achieved? The seeds were planted last year, when Fonterra went for a ‘back to basics’ strategy – for more on that, read this piece from former business editor Maria Slade from September 2019. It basically involved Fonterra abandoning plans to become the dominant player in the global dairy industry, and instead focus on the core business of collecting, processing and shipping New Zealand milk. That involved asset sales, but as this report from the NZ Herald shows, going into the shock of Covid-19 in a sounder financial position allowed them to weather it much better.

And why does it matter? Like it or not, dairying income props up huge swathes of the country. There was a quote in Gray’s story from Federated Farmers president Andrew Hoggard – “A lot of people have been pretty despondent about the last couple of years over what has gone wrong, so there is good, positive momentum going forward,” Hoggard said. “It will lift a lot of people’s spirits.” As Business Desk’s (paywalled) Rebecca Howard wrote the day before the announcement, agriculture has held the line while other sectors in regional New Zealand have been hammered – particularly tourism, accommodation and food service. With any luck, a lot of that milk payout will flow into the towns around the farms too.


We got a look on Friday at the economic plan National will take into the election. It includes broad tax cuts for a period of 16 months, with the gains of those accruing more to those on higher incomes. The NZ Herald’s (paywalled) Hamish Rutherford wrote about them quite explicitly as aimed at the middle class, and clear point of difference with Labour’s tax plan that involves putting a new top tax bracket in for a small number of people on the highest incomes. On a similar note, I’d strongly encourage you to read Justin Giovannetti on the competing plans, and how they blithely ignore the widening inequality that now seems inevitable.

Meanwhile, National’s virtual campaign launch was overshadowed by an accounting blunder in their fiscal plan being spotted, reports Stuff. It amounted to a $4 billion hole over a decade that they now need to find from elsewhere, which (seriously) in the grand scheme of the money being thrown around right now isn’t a massive number. But politically, it makes the party look stupid, and as Justin Giovannetti writes, they’ve given an inconsistent response. Finance spokesperson Paul Goldsmith apologised for the error, while leader Judith Collins tried to rhetorically bludgeon reporters into dropping the question line. Pattrick Smellie (paywalled) describes it as a “self inflicted wound” that will halt any momentum built up on tax cuts. And Politik’s Richard Harman has written about it in the context of a series of campaign blunders which have opened up space for parties on National’s right.


Air NZ boss Greg Foran has poured cold water on the prospect of a trans-Tasman bubble this year, and also criticised continuing with an elimination strategy to Covid-19. He made the comments in an interview with the Sydney Morning Herald, in which he said completely wiping out the virus wasn’t a realistic goal, and that countries would have to learn to live with it more. It’s partly significant as a comment because elimination remains the government’s strategy, while at the same time they are the majority shareholder in Air NZ.


The Auckland Harbour bridge is buggered, and will take at least a week to fix, after a freak accident. Stuff’s George Block has a series of updates on the situation, how it will massively increase congestion on Auckland’s roads, and the calls for those on the North Shore to work from home if at all possible. In the long term, it has reignited calls for another harbour crossing. The NZ Herald’s (paywalled) Simon Wilson has taken a look at the various proposals, and argues that what is really needed is a reliable crossing that doesn’t rely on people being in their own cars.


A new Covid-19 positive test was revealed yesterday, of a man who tested negative twice while in managed isolation. Our live updates has details of the case, with health officials still working out exactly what the source of the case was. It’s possible that the virus just had an abnormally long incubation period, which can happen. Meanwhile speaking of testing, I’d encourage you to read Siouxsie Wiles on the PCR test – there’s been a lot of conjecture around such tests recently, but the experts back them as reliable and critical for taking on the virus.


The high-profile Auckland Central electorate finally has a poll to assess the chances of the three main candidates, and Labour’s Helen White has a big lead. The Newshub Reid Research poll shows White has 42%, ahead of National’s Emma Mellow on 27%, and Chlöe Swarbrick of the Greens on 24%. It leaves the Greens with something of a strategic decision to make. The seat could be the difference between them staying or going from parliament, but Swarbrick campaigning around the country could also keep them above the 5% threshold. On a semi-related note, we’ve republished a piece about which haunts those candidates like to spend their time and money in.


A few democracy updates: The Electoral Commission has done a pair of releases with important information for the election. First of all, they’ve put out the official party and candidate information, with details on exactly who will be standing for the party vote, and with how many candidates. An interesting bit of trivia here: only Labour and the New Conservatives will have candidates in all 72 electorates, while National will have candidates in all 65 general electorates. They’ve also released the list of voting locations, with almost 3000 polling booths around the country.

As always, if you want to know who to vote for – I won’t ever tell you! But you can work it out for yourself by going to Policy, the one-stop shop for everything you need to know about what each party is running on.


I was lucky enough to attend not one but two candidate debates on the West Coast yesterday. The first one in particular, held in the DOC workshop in Punakaiki, was a phenomenally good afternoon of democracy, and I’d very much like to thank Teresa for inviting me along to it. I’ll be writing about both of them, and the wider situation on the Coast in a piece later this week. But it was also very cool to see the Westport News at both of them, so if you’re in the area and want to know about what happened, go pick up a copy and support local journalism.


Got some feedback about The Bulletin, or anything in the news? Drop us a line at thebulletin@thespinoff.co.nz

Māngere Markets at the Māngere Town Centre in South Auckland makes close to half a million a year. (IMAGE: JUSTIN LATIF/TINA TILLER)

Right now on The Spinoff: Eamonn Marra writes about the messages around asking for mental health help, and what actually happens when you do. Justin Latif reports on locals questioning why the Mangere Markets – a charity – has more than a million dollars in cash reserves. Alice Webb-Liddall profiles Esther Ng, a wildly successful young fashion designer who has no time or need for the local industry. Emily Writes raises the importance of antenatal depression, and how it is so often not openly discussed. Laura O’Connell Rapira makes the case for why taxes taking on wealth and land ownership are needed. And Jade Winterburn writes about an extremely high profile author scaremongering against trans people.


For a feature today, a remarkable piece of analysis about the nature of wealth and property ownership. It’s by historian Patrick Wyman, who I believe I linked to recently, and looks at the class of American wealth that is based primarily in more rural and agricultural areas of the country, rather than the major cities. As this excerpt might hint at, it was hard while reading it not to think about the way the political economy is structured a bit closer to home.

There are an enormous number of organizations and institutions dedicated to advancing the interests of this gentry class: Chambers of Commerce, exclusive country clubs and housing developments, the American Society of Concrete Contractors, and fruit-growers’ associations, just to name a small cross-section. Through these organizations and their intimate ties to local and state politics, the gentry class can and usually does wield significant power to shape society to their liking.

It’s easy to focus on the massive political spending of a Sheldon Adelson or Michael Bloomberg; it’s harder, but no less important, to imagine what kind of deals about water rights or local zoning ordinances are being struck across the country on the eighth green of the local country club.


The rugby public rejoiced over the weekend to see a bunch of plucky upstarts go into the heart of the empire and take back some silverware. At least, that’s how I’m choosing to see Taranaki nabbing the Ranfurly Shield from Canterbury. As Stuff reports, it took a monster penalty kick from Jordie Barrett to get the job done, with the margin between the teams only one point. Otago now get a crack at the shield, when they travel to Inglewood next weekend.


That’s it for The Bulletin. If you want to support the work we do at The Spinoff, please check out our membership programme



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