David Thompson Posted:
So very, very true. It beggars belief that we consider ourselves to be a developed nation when so much of our economy is based on selling milk powder or logs. BTW, I own a Plinius amplifier (my second) that drives a set of Theophany speakers.
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David Thompson Posted:
A robust but sobering report. It concerns me that confidence is rising, yet sales and exports are down and "manufacturers and exporters are still lagging behind other sectors". Surely we should wait until we're earning more money before we start spending more?
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siemens Posted:
Yes true! The only thing that will never die in this world is the nature and its science behind it. Great post.
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Kieran Ormandy Posted:
Thanks for the question Steven, Germany has seen increases in manufacturing employment since 2009, and Switzerland has had stable manufacturing employment between 2006 – 2011, even in the face of ongoing Euro-zone issues. Korea has seen increases in manufacturing employment since 2008 and Israel experienced large increases since 1998, while being stable over the last 4 years. Singapore has had increases in manufacturing employment over the last two years. These countries all value their manufacturing sectors and work to protect them, this is reflected in the above numbers and their performance through the GFC. Note data around the above examples was sourced from OECD labour market stats.
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John Walley Posted:
Point one: you should have no doubt what our Association says publically represent the views of our members. Point two: we don’t knee jerk responses, if you trace back our comments around NZPower you will see them link all the way back to our research in 2004 and 2005. All that material is fully linked from our comments above. Point three: you will note our comments on major users, sadly the same advantage does not accrue to smaller industrial users. The perverse incentives of the LRMC approach in all this are well known. Point four: the NZMEA is not like any other Association in New Zealand we admit only manufacturers and exporters into membership, and our public expressions are the views of that restricted membership.
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IMF supports capital controls

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A year ago the International Monetary Fund (IMF) pointed to the lacklustre performance of those smaller economies fixated on the one lever (interest rates) one target (inflation) approach to monetary policy, now IMF advice is moving towards regulation of capital movements. New Zealand cannot afford to ignore this advice and persist with the failed purist approach to monetary policy say the New Zealand Manufacturers and Exporters Association (NZMEA).

Late last year a report from the Bank of International Settlements showed New Zealand to represent about 1.6% of the global forex market, yet in GDP terms New Zealand is about 0.2% of the global economy – something is out of balance. How does forex trade at some 46 percent of GDP on a daily basis serve New Zealand?

Persistent high interest rates drive this speculative flow to many times that of our trade flows. Exchange rates do not reflect or support export activity and as a result the real economy has gone backwards since 2003. The IMF explains the problem well:

“Surges in inflows can pose challenges such as rapid currency appreciation and a buildup in financial sector fragilities, such as those stemming from asset price bubbles or rapid credit growth, or the risk of a sudden stop or reversal of inflows.”

NZMEA Chief Executive John Walley says, “This is a great description of a key New Zealand problem. Large capital inflows have caused a high currency and a house price bubble which reduced margins for exporters and starved many of credit. When the asset bubble burst in 2008 and the credit supply stopped we had finance company failures, and without the credit influx the Government struggles to balance its books.”

“The effects on economic growth are clear and there are still a number of borrowers sitting on negative equity.”

“The IMF details various measures that can be taken such as restricting banks foreign exchange position as a proportion of their total capital and using loan to value ratios to limit demand for credit.”

“These are useful measures that many other countries have been using with considerable success. It is time for our Government and Reserve Bank to remove their heads from the sand and take action to support New Zealand’s export economy.”

tags: imf, capital controls, credit growth, currency appreciation, monetary policy


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