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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Neville Bennett: Causes of economic weakness in Australia and their impact on NZ

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Neville Bennett reflects on lower than expected GDP numbers released by Australia and New Zealand in an article for He looks at the reasons for a decline in Australia and the impact this may have on New Zealand:

Dutch Disease

Australia has a bad case of Dutch disease. Dutch disease is an interesting concept. It arose when Holland received high returns from North Sea oil and Gas. The markets caused the guilder to inflate madly so Holland’s export sector withered. The currency was high and imports were sucked in. Everyone said how great it was to be Dutch but the Dutch people got little out of it.

True there was increased employment opportunities in the export sector (that always happens in cases of Dutch Disease) but employment in manufacturing fell more sharply.

The cost of living shot up, assets inflated and the Netherlands became a less favoured place to live. Brazil also has DD at present and UK firms are pulling out as it is too expensive to place staff there.

Australia gets little benefit from its minerals as much ownership is foreign. Companies like Rio Tinto have comparatively few Australian shareholders.

In Australia contraction has set in, consistent with Dutch disease. GDP was down because the terms of trade are moving against Australia. Commentators have missed this point. They say things are good because exports were up in the December quarter by 2.2% and imports down by 0.4%. They completely missed the essential point that the terms of trade were down by 4.7% because exports were under pricing pressure, and this pressure may intensify as exports to China are sharply down.

Australia has become over-dependent on the China market.

The contractions show in a small increase in unemployment by 0.1% in February to 5.2%. Observers are inclined, like Treasurer Swan, to blame much of this on the “cautious consumer”. This is economic fiddlesticks. Consumption is above trend, especially in cafes/restaurants. Australians are using the internet for many purchases and they are travelling abroad to buy: overseas holidays, up 8% in December.

In addition to Dutch Disease, Australians have the associated illness of a housing bubble.

They had tons of cheap foreign credit and have bid up house prices. Everyone knows that there will be a correction. Standard and Poors predicts a 10% fall if China has a hard-landing. Building approvals are sharply down by about 15% year-on-year. This means that the construction industry is not pulling its weight and therefore that GDP will contract and keep growth below trend.

Aussie Dollar

There are good technical reasons to short the Aussie dollar at present. Their Reserve Bank has signalled falling interest rates. Its 5-yr bonds has a 2.6% premium over US 5-years. But how convincing to traders is this differential? Australian inflation has been 1.06% higher than American in the last three years, so the net benefit of investing in Australian bonds is about 1% net of inflation.

US investors might look sideways too at Australian equities. Both have p/e's of around 14%, but Aussie stocks yield 4.8% while the US S&P’s 500 yields 1.96%. But the Aussie market depends on China and is lagging while the US is progressing well. US investors might wonder if the Aussie dollar is over-valued, and decide to short it.

I think the Aussie has got too high against the US$ and will correct.

Unfortunately, if there is capital flight from the Aussie, people in the northern Hemisphere will also look acidly at New Zealand which is linked in their eyes to the commodity currencies. The more sophisticated will note the Christchurch earthquake and slow growth in GDP of about 1% despite holding a successful rugby world cup. I suspect our slow growth is partly because the Australian economy is slowing down.

I think when the Aussie goes the Kiwi will go with it: but that is good as it will rebalance our economy towards manufacturing and exports.



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