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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28/6/12

RBNZ Policy Targets Agreement must reflect changes in ‘best practice’


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The Policy Targets Agreement (PTA) with the newly appointed Reserve Bank Governor Graeme Wheeler must have some serious revision say the New Zealand Manufacturers and Exporters Association (NZMEA). Wheeler was named as the Governor to replace Alan Bollard on Tuesday and will sign a new PTA with the Minister of Finance before taking over from Alan Bollard.

NZMEA Chief Executive John Walley says, “The appointment of a candidate from outside of the Reserve Bank is a good sign as there seems to be a culture of support for the status quo at the Bank, despite overwhelming evidence that it is not in New Zealand’s best interests.”

“Mr Wheeler and Bill English should be guided by the International Monetary Fund (IMF) which has described strict inflation targeting as 'not optimal' and said that 'the consequences of adverse exchange rate movements have to be taken into account' for small trade focused economies."

“Our Government and its officials still claim that we are following ‘best practice’ with our inflation targeting monetary policy but since the financial crisis best practice has changed. A more pragmatic approach where other prices in the economy such as the exchange rate are considered are now favoured and alternatives to an inflation target have been suggested.”

A number of institutions have changed their opinion since the economic crisis:

“The IMF has recently estimated that a 15 percent drop in the exchange rate would be needed to balance our current account,” says Mr Walley. “This should be a target for the Government and the Reserve Bank.”

“In the longer term a there needs to be a more balanced focus rather than strict inflation targeting. Inflation inside the target band delivered at the expense of the export sector will not deliver a sustainable economy for New Zealand.”

“The PTA should move well beyond inflation targeting - macroprudential intervention, capital controls and currency intervention all have a role play as we have seen elsewhere. Balanced objectives, better controls around asset bubbles, and the specific control of domestic inflation should all be part of the new PTA.”
 



tags: policy targets agreement, graeme wheeler, inflation targeting, exchange rate, reserve bank

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