Comments

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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11/5/11

Exchange rate and house prices overvalued: IMF


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The International Monetary Fund’s (IMF) report on New Zealand has revealed that New Zealand’s exchange rate is overvalued by 5 to 20 percent and house prices are overvalued by 15 to 25 percent. These figures show that little progress has been made to rebalance the economy and much more significant policy change is required say the New Zealand Manufacturers and Exporters Association (NZMEA).

NZMEA Chief Executive John Walley says, “It is glaringly obvious that our policy framework promotes a high exchange rate and investment in land and buildings. This leads to high debt levels, poor tradeable sector returns and as a result low investment in productive activity. It is good to see the IMF issuing this advice and it is for the Government to listen.”

“In fact the exchange rate figure is probably a bit underdone as the 5 percent end of the spectrum relies on our terms of trade remaining well above previous levels and we are starting to see some easing in commodity prices.”

The IMF recommended:
• “continuing efforts to broaden the tax base by looking at capital gains tax settings and introducing a land tax to fund growth-enhancing tax rate reductions.”
• The Core Funding Ratio “should be increased more than planned over time to reduce short-term external debt further.”
• “Some other measures such as countercyclical capital requirements and loan-to- value ratios could be introduced”
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“A realistic exchange rate improves returns to export activity, that will tend to swing investment toward the tradeable sector,” says Mr Walley. “Land and/or capital gains taxes and shifts in capital requirements will help address asset bubbles and to set a realistic exchange rate that will provide better returns to the tradeable sector. So far we have only seen tinkering around the edges from the Government, now is the time for some decisive change.”
 



tags: imf, exchange rate, house prices, land tax, capital gains tax, loan to value ratios

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