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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Households losing wealth as debt keeps going up - Stuff Business, 4 Oct 2016 New Zealanders have become poorer over the past year.

Signs of challenges for exporters - NZMEA survey - Voxy, 6 Sep 2016 The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during August 2016, shows total sales in July 2016 decreased 15.27% (year on year export sales decreased by 20.48% with domestic sales decreasing by 6.03%) on July 2015.

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The New Zealand economy - Is everything going to be alright?

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The follow opinion by Dieter Adam first appeared on and in Fairfax newspapers.

We have heard a lot about the state of the New Zealand economy over recent years.

We moved from the rock star economy to concerns over a dairy downturn, a housing price bubble and uncertainty over the future of the global economy.

And yet we are being assured that between booming inbound tourism, solid performance in the building industry and other sectors outside of dairy, and controls on government spending, everything is going to be alright.

The most recent GDP figures show annual growth of 2.5 per cent, slightly above the OECD average, with a forecast staying at or around the OECD average for 2017.

On the face of it, that is pretty good, but currently we are in large part importing growth, rather than creating it.

Our economic growth is connected to population growth due to immigration. The rise in real GDP per capita in 2015 was only 0.3 per cent and real national disposable income per capita, which takes into account population growth and changes in the purchasing power of income, fell 0.4 per cent in 2015.

The important question is, what are the prospects and underlying drivers for sustainable wealth growth in New Zealand?

There are many views on this, but three points remain largely uncontested.

The first is that we need to increase the share of exports in our total economic output.

When the current Government came to power in 2008, it made growth in the share of exports in GDP (from then about 29 per cent to 40 per cent in 2025) a key target.

We are still at about 30 per cent with no upward trend, which is little more than half of the OECD average of 55 per cent, meaning we are not yet an export-driven economy by international standards.

The Government may have gone quiet on its target, but the level of exports relative to GDP remains as a key predictor of our ability to pay our way and grow the economy overall.

The second aspect is to grow economic diversity in New Zealand – diversity creates stability of growth in the long term.

We have been aware for a long time that we need to diversify our economy and deliver more sophisticated products and services. Hence, for example, the regular calls for more value-added processing of our primary products – from milk to what, from fish to what, from logs of radiata pine to what?

We also need to move on from seeing dairy exports (or any other single category) as the key driver of our economic wellbeing, and from watching the ups and downs of different sectors of our economy as if we were following our favourite Super 18 rugby team.

The reality is that we need all of our major and emerging sectors to grow on a sustainable basis.

One point, in particular, is the importance of balancing factors.

The value of our commodity exports have been rising and falling sharply for a very long time, as they have been globally. This is an inherent feature of the commodity trade and it is here to stay, and highlights the importance of stabilising our economy through other sectors that can be consistent performers.

Tourism can be one of these. Visitor arrivals have grown steadily from about 80,000 a month in 1990 to 373,400 a month in February this year, with a few spikes like the Rugby World Cup.

In 2015 tourism contributed 4.9 per cent of our GDP and $11.8 billion in export earnings, making it the second-biggest after dairy.

The problem with tourism, however, is that while it plays an important part, both in growth and the promotion of New Zealand, it simply does not provide the high-value returns and productivity growth we need as a contributor to wealth creation, or the well-paying jobs we want.

As Sir Paul Callaghan said: "The more tourism, the poorer we get. Tourism is a great industry, but it cannot be a route to prosperity".

This is in reference to the low labour productivity in the tourism industry, whether measured in revenue per job, or in the wages it can afford to pay.

Adding more jobs in tourism effectively pulls the average per-capita income down for New Zealand as a whole. Again, it's not about playing down the importance of tourism. We need it, but we need to recognise its limitations.

Manufacturing is another – and arguably the most important – stabilising factor in our economy.

At 11 per cent it is the second-biggest contributor to GDP, more than double that of tourism, and only surpassed by rental hiring and real estate services - an interesting reflection on our economy in its own right.

Manufacturing is a major employer with over 200,000 employees, or 170,000 full time workers.

More importantly, manufacturing jobs require high skill levels and actively develops skills in its workers. They create above-average wealth and pay above-average wages.

With every new job in manufacturing, New Zealand does become wealthier.

Manufacturing is also the most innovative sector of our economy by a variety of measures, the biggest spender on research and development, and the driver for a more complex economy.

The third, and most important driver for wealth creation, however, is the overall skills level of our workforce.

There are many scenarios for what the future of economic development across the globe looks like, and none of them predicts a lower skills level.

On the contrary, if there is one thing we can invest in with confidence it is the skills of our people, and nowhere more so than where labour productivity is high already, as is the case in manufacturing or the IT sector, for example.

This call needs to go out to individuals at all ages and their (future) employers, but most of all to the Government, which is still the largest investor in education by a long shot.

We do not see anywhere near the level of direction required here, channelling resources into the areas where skills shortages are most severe.

An active and prudent immigration policy can contribute to raising skills levels, but it cannot replace investment in the right form of education, even in the short term.

tags: new zealand, manufacturing, exports, oecd, growth, immigration, income, diversity, dairy


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