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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19/1/12

CPI down, OCR cut makes sense


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The Consumers Price Index has dropped 0.3% in the December quarter and inflation increased by 1.8% year on year, well within the target band. That allows plenty of room for monetary policy that supports exports say the New Zealand Manufacturers and Exporters Association (NZMEA).

NZMEA Chief Executive John Walley says, “With problems continuing in Europe and a weak domestic economy, inflation pressure is likely to remain low for a prolonged period. That means every effort should be made to bring down the exchange rate to support the export sector. That means an Official Cash Rate cut next week and more policy changes over time.”

“The RBNZ has persistently overestimated inflation pressure in the economy; we have been calling for further cuts for some time, now is the time to act.”

“Using the exchange rate to defuse headline inflation caused by the domestic economy is a failed strategy. It is the primary reason for growth in the export sector stalling from 2004 until now. This practice will have to stop at some point if our economy is to rebalance.”

”It is worth noting that tradable inflation went down 0.9% in the December quarter.”

A better strategy for the Reserve Bank would be to:
• Target non-tradeable inflation;
• Use Loan to Value Ratios to control credit volumes; and
• Specify the amount of savings (deposits) banks are required to raise in New Zealand to limit offshore exposure.

“Had this been done 10 years ago debt levels and servicing costs would have been lower even if average interest rates had been higher.  Overall the New Zealand economy would now be better balanced with higher wages, more jobs, more savings and better housing affordability,” says Mr Walley.

“With headline inflation dropping there is no reason to hold up interest and exchange rates artificially. We must see a cut from the Reserve Bank next week, and policy changes introduced over time to target inflation in the non-traded sector.”
 



tags: reserve bank, ocr, cpi, loan to value ratio, monetary policy

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