Business News

Picture: Gordon Sutherland, A W Fraser. -Doug Green 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, […]

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during January 2013, shows total sales in December 2012 decreased 5.35% (export sales decreased by 3.83% with domestic sales decreasing 6.62%) on December 2011. The NZMEA survey sample this month covered NZ$556m in annualised sales, with an export content of 46%. Net confidence fell to -14, down from the  result reported last month.  The current performance index (a combination of profitability and cash flow) is at 101, down from 104.5 in November, the change index (capacity utilisation, staff levels, orders and inventories) went down to 97 from 102 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 101.75, down on November’s result of 104. Anything less than 100 indicates a contraction.  Constraints reported were 86% markets, 7% skilled staff and 7% production. Staff numbers for December increased year on year by 1.89%. “2012 ended on a negative note, both domestic and export sales fell year on year,” says NZMEA Chief Executive John Walley. “Confidence fell, after a bit of a recovery in November. This is largely due the ever higher exchange rate. At the same time we see decreases on our composite indexes.” “There is not really a lot of good news about at the moment, markets are soft and margins are squeezed by the exchange rate.” “The Reserve Bank yet again chose to keep interest rates at 2.5%, despite the recognition that the dollar is overvalued. This is disappointing, as the recent low inflationary pressures have left room for a cut to boost growth and counteract some of the exchange rate appreciation. Their main concern, as always, was a house price bubble, but bereft of any supplementary instruments interest rates cannot do it all. Mutterings from the RBNZ on […]

The New Zealand Manufacturers and Exporters Association (NZMEA) welcome the announced changes to the apprenticeship scheme, particularly the merging of the Modern Apprenticeship fund into one scheme and the increase in funding. “It’s simple, easy to understand, administer, and supports all apprentices regardless of age,” says Peter Herbert, Executive member of the NZMEA and Chair of Apprentice Training New Zealand (ATNZ).  “This, along with the increased funding, demonstrates greater Government commitment to the apprenticeship system which is essential for the manufacturing and exporting community.”  “Those of us in industry understand the need for skilled tradesmen and technicians to drive our industries into the future. We are competing in highly specialised markets which require innovation and skill – in other words, a highly skilled, highly competent workforce,” says Mr Herbert. “It is a four-year commitment for most companies taking on an apprentice and the incentive offered by Government makes the decision that little bit easier,” says Mr Herbert. Apprentice Training New Zealand Trust (ATNZ) is New Zealand’s largest employer of mechanical engineering apprentices, currently employing around 350 apprentices, which it seconds to engineering and manufacturing companies throughout New Zealand.    

The failure to make a firm recommendation on the mutual recognition of imputation tax credits clouds the value elsewhere in the joint report, Strengthening Trans-Tasman Economic Relations, just released by the Productivity Commissions of New Zealand and Australia. The Employers and Manufacturers Association says the failure not to come out strongly in favour of mutual recognition of the tax credits suggests, despite all the analysis put up to the contrary, that at least $300 million of benefit to our trans Tasman economies is not important.  “The Productivity Commissions shy off from the single most significant impediment to the development of CER,” said Kim Campbell, EMA’s chief executive.  “Mutual recognition of tax credits is by far the most important outstanding issue,” Mr Campbell said.  “At stake is New Zealand’s very ability to build and retain world scale companies head quartered here. “So long as the issue remains unresolved, the risk is their head offices will always migrate to Australia.  “Under the present regime, when the success of a New Zealand company means it attracts more shareholders in Australia than here, then those shareholders will always oblige the company to transfer its head office to Australia.  “There have been several high profile examples of this modern day economic colonialism; the Australian government is reluctant to act on it because Australia is benefiting from the value created by New Zealanders. “It’s extremely disturbing, and we urge our Prime Minister to redouble New Zealand’s efforts to resolve it. “Continuing the present arrangement also reduces the returns that Australian businesses with operations in New Zealand can achieve. “It’s a pity the Productivity Commissions didn’t take into account these longer term implications in their economic analysis as other recommendations in the report are most worthwhile. “For example the concept of a trans Tasman visa where people […]

The service sector continues to see its level of expansion slip lower, according to the BNZ – BusinessNZ Performance of Services Index (PSI). The PSI for December was 51.5. This was down 2.7 points from November, following a 3.6 fall from October (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Over 2012, the PSI has averaged 53.8, with all but one month (August) in expansion. Compared to previous December results, the 2012 value was almost identical with 2011. BusinessNZ chief executive Phil O’Reilly said that 2012 had been mostly positive for the service sector, although the second half of the year provided mixed results.  “When comparing the PSI with its sister survey the PMI, the service sector has held up despite another difficult trading year. However, 2012 has ended with more of a whimper than a bang as new activity/sales slowed and employment remained lacklustre.  “Globally, the service sector has shown incremental improvements over the latter half of 2012, which should bode well for on-going growth trends in 2013. Whether we see this uplift in New Zealand remains to be seen, given the domestic PSI has shown patchy growth for a number of months.” BNZ senior economist Craig Ebert says the most positive message to take from the December results is in the jobs growth area. “The PSI staffing index is decently above the line. When combined with other pointers to jobs across the economy, we have good reason to believe employment growth is in the throes of picking up, perhaps to as much as 2% for 2013 as a whole. This would amount to an addition of about 45,000 jobs.” The seasonally adjusted BNZ – BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) […]

Prime Minister Key’s aspirational speech today focuses on what it needs to – the economy, and business applauds that, as far it goes. “Without a doubt the PM’s speech is right in principle to focus on investment,” said Kim Campbell, chief executive of the Employers and Manufacturers Association. “Its also great to see the PM list the headings of the government’s Business Growth Agenda once again and to target policies that are not business unfriendly. “All government ministers should be required to memorise and repeat this agenda as part of all the speeches they make this year. “But to deliver a step change of investment in productive enterprise that the PM wants, investors need to be able to see they can make rapid and smooth transitions from the time their capital is available to the start up of the enterprise they are investing in. “To do this we need clear and simple rules for accessing capital, facilitative planning processes, and a competitive taxation regime, and ease of immigration. “No single factor will be the answer so it is vital all government ministers and departments work consistently to achieve the investment goals. “To get them to do so is a big ask, as one of the most difficult tasks is to get government officials aligned with policy objectives, and that applies equally at local government level. “But New Zealand can do it.”  

More funding and focus on apprenticeships is the right approach, says BusinessNZ. BusinessNZ Chief Executive Phil O’Reilly says the revamped New Zealand Apprenticeships scheme announced today will help get more people into needed skill areas. “More overall funding, higher requirements for educational content and financial incentives to enter into apprenticeships are useful changes,” Mr O’Reilly said. “Higher incentive payments for priority construction trades will particularly help get the skills needed for the Christchurch rebuild.  “It will be important for these changes in apprenticeships to be executed well.  Employers want quality apprenticeship training.  “Allowing employers to get direct access to industry training funding to organise their apprenticeships if desired will bring competitive pressures on ITOs and help build on their higher performance in recent months. “Past problems in the system that resulted in waste and large numbers of ‘phantom trainees’ have been robustly addressed by recent work in this area and by the changes announced today.  BusinessNZ strongly recommended that savings from fixing the problem should be reinvested in industry training and it is pleasing to see this happening. “Under the new scheme the increased focus on higher educational content will need to complement – not replace – practical elements of the training. ““The training will need to be fit for purpose, with the ability to hold ITOs, training providers, employers and trainees to account. “It will be important that government agencies and ITOs work together with industry to ensure that these changes do enhance the value of training for employers and employees.” More funding and focus on apprenticeships is the right approach, says BusinessNZ. BusinessNZ Chief Executive Phil O’Reilly says the revamped New Zealand Apprenticeships scheme announced today will help get more people into needed skill areas. “More overall funding, higher requirements for educational content and financial incentives to enter […]

The Government is pressing ahead with a wide range of measures to build a more productive and competitive economy, Prime Minister John Key says. “New Zealand has to be a magnet for investment,” he said in a speech to the North Harbour Club in Auckland today. “That’s investment by individuals and small businesses, as well as big businesses; and it’s investment by people from overseas as well as Kiwis. The more investment we get, the more jobs will be created.”  To ensure that future growth is based on investment, exports and savings, the Government has set out a wide-ranging programme of initiatives – including ensuring people have the right skills to contribute to the workforce.  As the next step in the Government’s programme to improve skills and vocational training, Mr Key today announced a new initiative to expand and improve apprenticeship training. “As a result of these changes, and stimulated by the boom in construction and other trades that is already underway in Christchurch, we estimate that around 14,000 additional apprentices will start training over the next five years, over and above the number previously forecast,” Mr Key says. “That will mean thousands of New Zealanders get to learn a new trade that will last them a lifetime.” Mr Key says addressing issues in the housing market and further reforming the Resource Management Act are also among the Government’s priorities this year. “With housing, we want to work closely with local councils and I believe our goals in the end are the same. But if councils aren’t able to change their planning processes, then the Government will have to get a lot more proactive because we are very serious about this issue.” The Government is working on a further stage of comprehensive Resource Management Act reforms, which will be released […]

In light of the latest CPI result today the Reserve Bank should review how it assesses inflation and cut the official cash rate, the Employers and Manufacturers Association says. “With inflation below the Reserve Bank’s mandated target for three consecutive quarters now the official cash rate should be cut, said Kim Campbell, EMA’s chief executive (pictured). “Lowering the OCR makes sense for three important reasons: 1) It would help keep us in line with interest rate cuts in Australia, our largest trading partner, thereby maintaining the trans-Tasman cross rate at its present favourable level. Further falls in the Australian dollar could well stifle our exports to Australia and short circuit our fragile recovery. 2) It should keep us within the central bank’s mandated target range for inflation by holding CPI prices between one and three per cent over the medium term. 3) It would make investment in productive enterprise more attractive; interest costs are a hand brake on investment.  “If we’re lucky it might also help bring our exchange rate down marginally.  “The Reserve Bank needs to separate out the price inflation in Auckland’s housing market from the deflation elsewhere in the economy. For example the Producers Price Index has been negative for many months, and Auckland’s house prices are driven by insufficient stock due to few new houses being built over recent years. “No adjustment to interest rates will make any difference to the present lack of housing. “If housing affordability is an issue, that’s hardly the responsibility of the Reserve Bank and we fail to see why the productive sector should be punished for a lack of housing stock. “Some groups advocate a change to the Reserve Bank Act. That’s unnecessary. All the Bank has to do is stick to its own rules.”  

BEIJING—China is losing its competitive edge as a low-cost manufacturing base, new data suggest, with makers of everything from handbags to shirts to basic electronic components relocating to cheaper locales like Southeast Asia. The shift—illustrated in weakened foreign investment in China—has pluses and minuses for an economy key to global growth. Beijing wants to shift to higher-value production and to see incomes rise. But a de-emphasis on manufacturing puts pressure on leaders to make sure jobs are created in other sectors to keep the world’s No. 2 economy humming. Total foreign direct investment flowing into China fell 3.7% in 2012. -Wall Street Journal Asia