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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16/4/12

Brian Gaynor: Why the kiwi can't catch the kangaroo


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Brian Gaynor writes on why New Zealand's economy cannot catch Australia and what needs to change in an article for the NZ Herald:

The problem in New Zealand is the small population and the inability of manufacturers to achieve economies of scale.

As manufacturers expand they have to export, but our narrow-minded monetary policies, which focus almost exclusively on inflation, inevitably lead to high interest rates and a strong New Zealand dollar.

Manufacturers cannot thrive in a small domestic market when a high currency makes exporting extremely difficult.

The fastest-growing area of the New Zealand economy over the past six years, in percentage terms, has been government administration and defence, which has expanded by 19.7 per cent.

The Government's inability to carry out reforms of the Ministry of Foreign Affairs and Trade shows it will be difficult to restrict the growth of the public sector.

But the biggest difference between the two countries is probably in their main industries, agriculture and mining.

Our agriculture sector has grown by 7.6 per cent over the past six years as commodity prices have boomed. But agriculture growth is restricted by grass and plant growth whereas Australia can dig more and more holes in the ground as demand for iron ore, coal and other minerals increases.

As a result, Australian mining output has expanded by 23.6 per cent since the end of 2005.

The higher rate of economic growth across the Tasman has had several consequences, including:

* The Australian economy has created 1,352,400 new jobs since the end of 2005 compared with 116,500 in New Zealand. This is a 13.3 per cent increase in the number of jobs across the Tasman compared with 5.5 per cent in this country.

* Average weekly wages have grown by 27.3 per cent in New Zealand over the six-year period, compared with 30.4 per cent in Australia. The average weekly wage, in NZ dollar terms, is now $750 higher across the Tasman.

* New Zealand's unemployment rate is 6.3 per cent compared with 5.2 per cent across the Tasman.

* Australia's population is growing much faster than ours, mainly because the country is attracting a large number of migrants who are lured by job opportunities and high wages. Over the past four years Australia's population has grown by 7.3 per cent, with net migration contributing 61 per cent of the growth while New Zealand's population expanded by 4 per cent with net migration contributing 26 per cent

* Over the past six years, New Zealand has had a 160,000 net migration loss to Australia as individuals, particularly the younger generation, have taken advantage of the buoyant Australian job market and higher wages.

No matter which way one looks at it, the gap between New Zealand and Australia is getting wider and wider. We sit and gaze as Australia powers further and further away from us, taking our brightest graduates with it.

New Zealand is beginning to look more and more like an enormous retirement village but who will provide the taxes to support the village residents?

A recently published United States book, Why Nations Fail by MIT economist Daron Acemoglu and Harvard political scientist James A. Robinson, looks at the issues that could explain New Zealand's poor economic performance.

They believe that an important difference between countries is their institutions - whether these institutions look after the rights of all individuals or only a few.

They also believe that it is important that these institutions encourage investment in the productive sector.

According to the authors: "Inclusive economic institutions that enforce property rights, create a level playing field, and encourage investment in new technologies and skills are more conductive to economic growth than extractive economic institutions that are structured to extract resources from the many by the few."

New Zealand's original privatisation programme, in which a few individuals became extraordinarily wealthy, and our failure to regulate the 1980s sharemarket boom and recent finance company debacles are examples of political and institutional failures, particularly by the defunct Securities Commission.

These failures have enabled a few to become extremely wealthy at the expense of the many.

They have also discouraged investment in the productive sector and encouraged individuals to put most of their money into residential housing where property rights are better enforced.

New Zealand hasn't a hope in hell of catching up with Australia until we develop strong political and economic institutions that are inclusive and adopt strategies that encourage individuals to invest in the productive sector.



tags: nz dollar, productive sector, job creation

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