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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Monetary policy matters

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A change in the Reserve Bank Governor provides an ideal catalyst to change the Policy Targets Agreement between the Reserve Bank and the Government say the New Zealand Manufacturers and Exporters Association (NZMEA). Bill English commented yesterday that monetary policy was not important as inflation pressures are low, but monetary policy is still vital to an improved performance from the traded sector.

English commented that:
“the issue now isn’t monetary policy, it’s been quite accommodating. The issue is building confidence and building investment”;
“There are a whole lot of other issues that are much more important around productivity, around getting our resources into the tradable sector, around building investment, getting Christchurch rebuilt”.

NZMEA Chief Executive John Walley says, “To suggest that monetary policy is not an issue when we are seeing 30 to 40 percent swings in the Trade Weighted Index is absurd. The best way to get more investment and growth into the tradable sector and lift productivity would be to sort out the exchange rate.”

“English himself regularly presents this graph showing the tradable sector in decline since 2004.”

“Monetary policy is the biggest cause of this decline.”

“Over Dr Alan Bollard’s time as Governor we have seen severe damage to the traded economy, partly due to mismanagement of the current system, and partly due to a reluctance to use alternatives to the Official Cash Rate to support exporters.”

“Over time an elevated exchange rate strangles investment in the traded sector; that low investment inevitably leads to low productivity, contraction and failure, particularly for the high value added sector.”

There are three questions the Government need to consider before agreeing to a new Policy Targets Agreement:
• Does the Governor continue to make decisions or do we use a committee?
• Should inflation remain the only target of the RBNZ?
• Should macro-prudential tools in addition to interest rates be used by the RBNZ?

“There is a strong case for a change on all three points,” says Mr Walley. “The biggest barrier to export growth is an overvalued and volatile exchange rate; changes to the Policy Targets Agreement must be part of this solution.”

tags: monetary policy, alan bollard, traded sector, policy targets aggreement, bill english


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