-By EMA senior policy analyst Michael Burgess

Despite the economic predictions, manufacturers have concerns with finding skilled workers, the bewildering speed of technological change, and how to make investment decisions in light of low business confidence.

 Internationally and domestically, a number of factors have put the brakes on the New Zealand economy in 2019. Domestically, the feeling is downbeat, with low levels of business confidence appearing relatively deep-seated.

A number of key indexes that the EMA monitors continues to highlight that slowdown, with GDP also slowing to just over 2.1 per cent year-on-year. The Performance of Manufacturing Index is at levels not seen since the Global Financial Crisis, with forward orders also at their lowest levels since 2019.

The October PMI result raises the prospect of the manufacturing sector’s recent negative results coming to an end in the final quarter of the year.

However, most international economic agencies have downgraded their growth forecasts. The latest J P Morgan Global Manufacturing Survey is also in negative territory, with optimism dropping to its lowest level since first tracked in 2012.

Despite the economic predictions, manufacturers have concerns with finding skilled workers, the bewildering speed of technological change, and how to make investment decisions in light of low business confidence.

The Employment Relations Amendment Act introduced new duties on employers.  Employers with more than 19 staff can no longer use the 90-day trial provisions and must now use probationary periods.

The Employment Relations (Triangular Employment Act 2019 will take effect in June 2020. This affects triangular relationships where an employee is employed by an employer, but performs their work for another organization which controls the employer’s day-to-day work.

The Holidays Act review is ongoing, any substantive overhaul has been delayed because the government taskforce needs more time to run tests. It is unlikely that anything will be implemented before late 2020.

Some key Government initiatives were announced this year which will help the manufacturing sector.

R & D tax incentives changes were introduced. These included a tax credit rate of 15 per cent; $120million cap on eligible expenditure and a minimum R&D expenditure threshold of $50,000. Manufacturing firms are twice as likely to invest in R&D as the average NZ firm.  Recent Stats NZ survey data on R&D spending by businesses increased $548 million in the past two years to more than $2.1 billion in 2018.

NZ overall R&D spending in 2018 was equal to 1.37% of GDP. Government has committed to raising this to two percent over the next 10 years. The changes on R&D over 2019 will help in this.

The Future of Work Forum in 2018 endorsed The Manufacturers Network pilot programme that addresses the skills shift need in manufacturing to meet the challenges of automation and artificial intelligence. The project will identify gaps and training courses.

The EMA Employers Survey in 2019 showed 51 percent of respondents say the current impact of    technologies such as robotics, artificial intelligence, big data, 3D printing and other Industry 4.0 technologies will have an impact on their business.  The biggest challenge for employers with Industry 4.0 is a lack of qualified staff; followed by excessive investment requirements and then concerns with data security.

Another initiative recently announced for Manufacturers and will come into effect in February 2020 is the development of an Industry 4.0 Demonstration Network.  The network will consist of:

.               A mobile Industry 4.0 showcase;

.               A network of Industry 4.0 site visits and

.               Access to, and observation opportunities in, up to two smart factories.

The mobile Industry 4.0 showcase will be a self- contained demonstration aimed at showing the underlying concepts and benefits of Industry 4.0. The showcase will visit both industry and schools.

This will give secondary schools students the opportunity to engage with the manufacturing sector.

Together with a network of site visits and the development of a smart factory this will certainty providing some exciting times for manufacturers to show where their sector can go.