Picture: Gordon Sutherland, A W Fraser.
Opposition parties have commenced a series of meetings with the country’s manufacturers with an eye to a better future.
Difficult conditions are affecting New Zealand’s manufacturers brought about in part by the high exchange rate. It’s an obvious one. I know through my meetings and conversations with manufacturers around the country that this is one of the key concerns for their viability, indeed for the future of their company.
I don’t know how much communication I have had from John Walley of the New Zealand Manufacturers and Exporters Association on this point. Indeed, his frustration has been (almost) toxic at times because he points out what we all know – the exchange rate effects our companies too much in today’s market and something has to be done about it.
NZMEA gathered key people together for these meetings and are to be commended on doing so.
A participant and also contributor to this issue of NZ Manufacturer, Gordon Sutherland of A W Fraser says “The prevailing view from the media and government is that we cannot do anything about the exchange rate, in fact it almost seems as if the government are willing to sacrifice exporters just to keep to the long held view that the reserve bank act and its ensuing monetary policy is sacrosanct.
“As the dollar climbs, we often hear in the media and from, in my view uninformed parties ask, “Why don’t exporters just put their price up?”
“It sounds like a beautifully simple solution; as the exchange rate goes up, put your price up. Unfortunately this view outlines a very poor understanding of basic business practice.
“As an exporter, if our product is being shipped to and sold in the US, we are competing with local US manufacturer’s, whose costs are not affected by the exchange rate.
“How can we possibly put our price up if the local business has no need to, we would lose all our demand? The issue here is that as a good business, you should always be charging the market price for your product; in other words, as much as the market can bear for the goods and services you provide.”
Keith Whiteley, managing director of Christchurch-based CWF Hamilton, manufacturers of Hamilton Jets. pioneers in the 1950s of jet engine boats say the exchange rate has to be carefully looked at.
Stewart Hydes of Wyma Engineering whose company makes polishing and handling equipment now sources a substantial amount of its componentry from China, thanks to the exchange rate.
This move has cost local jobs and Wyma is looking overseas for its final assembly.
There is the political nature of a gathering such as this with opposition parties in attendance and John Key calling it a political stunt because he wasn’t invited. However, if he was in opposition heÕd be doing the same thing too.
Other measures to assist manufacturers need to be considered such as tax credits for research and development, and accelerated depreciation on productive assets.
Manufacturing is changing
As we applaud initiatives such as this to help our manufacturers stay competitive we need to realise that manufacturing is changing and as a country New Zealand manufacturers need to have as much support as possible to compete on world markets.
In the next 15 years 1.8 billion consumers will join the global marketplace. Demand will grow not only for basic goods made in developing countries but also for innovative, high-tech products made by First World countries.
Manufacturing in New Zealand sits around the mid-30% as it does with other developed countries. And like them we suffer from a lack of skilled workers and the steadily retiring baby boomer generation which brings about competition for those who know how to do the job.
So there are a few issues needed to be sorted for the future of manufacturing in New Zealand. We either keep on going as we are and suffer the mantra of ‘swings and roundabouts’ or we tackle issues like the exchange rate and consider as well other assistance for manufacturers.
Judging by the consistent concerns of our manufacturers over the past few years – and those raised at the first of these meetings – enough momentum is in place to bring about change.