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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Commodities killing exports?

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There has been a view that high commodity prices are reducing the impact of the high New Zealand dollar. This is despite the fact that commodity exports only make up a quarter of our exports and there are numerous other reasons for the dollars’ appreciation.

This graph shows that only 25 percent of New Zealand’s exports are solely reliant on commodity prices. For the rest a high exchange rate means lower returns and therefore less investment in new products and capacity expansion.

Economic commentator Neville Bennett has described this as New Zealand’s version of the ‘Dutch Disease’ in an article for

“We have a high dollar which is not only encouraging our industry to migrate overseas, but which is also making imported goods very cheap. Our manufacturers face unfair competition because the exchange rate is too high.

The consequence is that, like many western economies, New Zealand is hollowing out and losing a vital part of its economic structure. Many skilled people in the secondary sector are being displaced and the sad fact is that if the dollar ever plunged again the fitters and turners, machinists etc. will have lost their skills.

There is a classic case today where the people making railway carriages in Dunedin are being laid off because imported carriages were marginally cheaper. If the dollar was fair value we would most likely have kept their jobs, skills, and demand in Dunedin would be higher. We will have some difficulty in carriage making in the future.”

Bennett’s comments are on the money. Any sustained period with a high dollar will inevitably lead to either New Zealand firms moving offshore or these firms losing business to offshore competitors. He also presents a plan for dealing with the problem suggesting a capital gains tax, a financial transactions tax and capital controls as methods to deliver a more trade based value. These comments are worth a read.

tags: neville bennett, exchange rate, export profile, capital controls


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