Business News

Manufacturing and Wholesale is emerging as one of the bright spots of the New Zealand economy as the sector posted big revenue gains, despite difficult economic conditions and continuing pessimism about the pace of the economic recovery, according to a new study. The MYOB Business Monitor, a regular survey of over 1000 small and medium enterprises, found that the Manufacturing and Wholesale sector had the most revenue gains of any business group over the last 12 months. 44% of businesses in the sector reported revenue rises in 2011. Looking at 2012 revenue forecasts, Manufacturers are also the most positive about their prospects, with 57% expecting revenue growth over the next 12 months. Just 3% of businesses in the sector expected their revenue to fall, the lowest of any sector surveyed. This optimism is being fuelled by reports of just over half of Manufacturers indicating they have more work in their sales pipeline for the next 3 months (April – June 2012). MYOB General Manager Julian Smith said these results showed the importance of the Manufacturing and Wholesale sector to the wider New Zealand economy. “What this survey shows is how important the Manufacturing and Wholesale sector is to the New Zealand economy, as it continues to grow and succeed despite some very difficult economic conditions. To see such strong growth at a time when many other sectors are struggling highlights the huge contribution the sector is making.” Much of the sector’s strong showing over the past year has been driven by positive results from the Auckland region, where 54% of businesses in the sector were reporting revenue gains. Christchurch’s Manufacturing and Wholesale businesses also performed well, with 40% reporting an increase in revenue. However, manufacturing businesses in the Wellington region are not performing as well, just 20% of business owners […]

The latest inflation statistics demonstrate the wealth transfer from the traded economy to the non-traded economy. This must stop say the New Zealand Manufacturers and Exporters Association (NZMEA). Statistics New Zealand’s March quarter figures show non-traded inflation up 1.2% from the previous quarter with traded inflation down -0.4%. NZMEA Chief Executive John Walley says, “New Zealand’s monetary policy essentially works by lifting the level of the exchange rate to suppress inflation in the traded sector. The problem with this method is that inflation in the domestic economy remains unchecked. Over a period of time this has lead to lower activity in the traded sector while spending has not been restrained in the domestic economy.” “Since 2004 non-traded inflation has averaged 3.8% while traded inflation has averaged 1.75%. Essentially the traded economy is subsidising activity in the non-traded economy.” “The current account deficit shows the problem with this strategy,” says Mr Walley. “When you run a deficit you have to sell assets or borrow as the Government is doing now.” “Instead, export success, and therefore the exchange rate, must become a focus of monetary policy. This will help reduce foreign debt, increase foreign earnings and, over the long run, increase growth and incomes.”  

Expanding the Auckland convention centre will boost the national economy, says BusinessNZ. “The business-to-business benefit of a larger convention centre is significant,” says BusinessNZ Chief Executive Phil O’Reilly. “Travellers coming to larger international conventions in New Zealand will increasingly see New Zealand as a place to do business. We saw that happen during the Rugby World Cup, with the highly successful Business Club venture. A world-class convention centre could help bring a significant boost to inward and outward investment. “But this is all dependent on size of facilities. Size matters when pitching for big events, and New Zealand is currently missing out on large international conventions. “Big conferences centres like Singapore, Las Vegas and Dubai thrive because their facilities meet size thresholds. New Orleans’ recovery from Hurricane Katrina was faster because it quickly rebuilt its very large conference facilities. Attracting big events brings new direct spending as well as much other associated economic activity. “For Auckland, the prospects include increased revenues for hotels, local tourism, catering, entertainment and other associated businesses. Air New Zealand and domestic transport business like rental vehicles, taxis and others would all benefit from an expanded Auckland conventions sector. “Conference-goers often return later as tourists, bringing long-term economic benefits. For a distant country that has to work harder to attract visitors and tourists, a fit-for-purpose convention centre is needed. “These are some of the very significant benefits that should not be overlooked in the current debate about the expansion of the SkyCity convention centre.”  

The likelihood of a severe European debt meltdown has receded in recent months, and the foundations for continued economic recovery remain in place for New Zealand over 2012, according to the latest ASB Quarterly Economic Forecast. ASB Chief Economist Nick Tuffley: “Europe has made better progress this year in dealing with its debt crisis, and we expect the region will continue with its ‘muddle through’ approach to keeping the crisis from becoming more severe. While prospects in Europe appear to have improved, it will be a long and gradual process for Europe to reduce its overall vulnerabilities, and further flare-ups are likely along the way. Here in New Zealand we expect that with the situation in Europe reasonably contained, we will continue on our slow path to recovery.” Meanwhile, there is another risk now emerging at the petrol pumps, with oil prices back on the rise. However, Mr Tuffley remains optimistic the impact on New Zealand will be limited. “In New Zealand our oil usage is more efficient as we respond to a decade of high prices. There is also a silver lining because higher oil prices directly benefit New Zealand through the increased appetites of oil producing countries for our dairy and meat products.” Mr Tuffley also notes the recent strength in New Zealand house prices. “Increased construction will progressively alleviate house price pressure over 2013 and 2014,” he says. “Canterbury has years of residential reconstruction ahead of it, and in Auckland rising prices and rents are giving a strong signal to build. Households are also lifting their spending and momentum will continue to increase modestly.” Mr Tuffley predicts the OCR will peak at four percent, but the rise in interest rates will be gradual. “The high New Zealand Dollar is a continuing headache for the Reserve Bank, and […]

Manufacturing activity continued to show healthy levels of expansion, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI). The seasonally adjusted PMI for March was 54.5 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 3.2 points down from February, but the second highest result since May 2011 and third highest since June 2010. For the first three months of 2012, the PMI has averaged 54.4, compared with 51.9 for the corresponding quarter in 2011. BusinessNZ’s executive director for manufacturing Catherine Beard said that although the March result was lower than February, the result was still a step in the right direction for stronger growth in the sector. “February’s main value was a welcome shot in the arm for the sector, while the March result ensured some further impetus as both new orders and production kept manufacturers busy. However, it is important to bear in mind that although some have experienced better conditions for business, others are still struggling. This is best shown via negative and positive comments from manufacturers mentioning offshore orders, with the former finding difficulty in the European market, and the later enjoying continued success with the Australian market.” BNZ Economist Doug Steel remarked “March’s PMI result is a solid result. Although it didn’t quite live up to February’s humdinger, it represents positive momentum. These PMI results fit with our view that manufacturing made a decent positive contribution to overall Q1 GDP growth.” Four of the five seasonally adjusted main diffusion indices were again in expansion during March, led by production (56.4) and new orders (56.2) with very similar levels of activity. Employment (52.3) inched upwards in March, while deliveries (52.0) fell 1.8 points from February. Finished stocks (49.1) experienced its third consecutive contraction. […]

The 8th Australia New Zealand Leadership Forum which opens in Sydney tomorrow will focus on using CER and the single market as a springboard for developing new business in third markets, says Forum co-chair Jonathan Ling. “This year’s Forum meets as Australia considers in a new White Paper how best to advance its interests in the Asian century and as the two countries’ Productivity Commissions focus on what more can be done to stimulate greater integration. The theme of this year’s Forum – ““Australia and New Zealand – together in the Indo-Pacific century”” provides the context for a broad vision for the relationship and on how to improve competitiveness and position the two countries for success in global markets.” The Leadership Forum will again bring together leaders from government, business and the community to exchange views and ideas on significant political and economic issues. The Forum is co-chaired on the New Zealand side by Jonathan Ling, Chief Executive of Fletcher Building. The well-known company director and leader of Sydney’s Olympic bid, Rod McGeoch AM, is co-chair on the Australian side. As part of new institutional arrangements for the Forum, BusinessNZ has been working in support of Jonathan Ling in progressing the Forum’s agenda. “Our job has been to put in place a work programme which can build on Forum outcomes and generate a further leap forward in the relationship”, said BusinessNZ CEO Phil O’Reilly. “Since the last Forum a small group has focused on a number of key issues including how to free up trans-Tasman investment, progress the vision of a common border and promote development in the Pacific”. Mr O’Reilly said the New Zealand business community was ambitious for the future of the relationship. “The relationship with Australia is critical to New Zealand’s economic success. One year out from […]

  Renowned superyacht and performance sailing yacht designer Ron Holland will be lecturing in The University of Auckland’s new masters programme in yacht engineering. The Master of Engineering Studies in Yacht Engineering, offered by the Yacht Research Unit based in the Faculty of Engineering, is believed to be the first yacht engineering masters degree in the world. Mr Holland, who is widely regarded as one of the world’s most influential yacht designers, has been involved with the yacht design industry for 37 years. The Ireland-based yacht designer, who was born and raised in New Zealand, has design studios in Kinsale, Ireland, and in Vancouver, Canada. Director of the Yacht Research Unit Professor Richard Flay says Mr Holland will be taking six lectures focused on the practical aspects of running a yacht design business. “Ron will be lecturing on how to deal with the business side of the industry including how to set up a yacht-design business, and how to work with the client to achieve a successful outcome. “We are incredibly fortunate to have Mr Holland involved in the masters programme. He’s won numerous awards and been responsible for many innovations within the yacht design industry in the past three decades,” says Professor Flay. Professor Flay says the one-year programme provides students with technical, engineering, economic, and regulatory knowledge. “The masters degree is for students who are looking to work as designers or research engineers in the yacht and small craft industry, or the high performance yacht racing sector.” The University launched the Masters in Engineering Studies in Yacht Engineering at the 4th High Performance Yacht Design Conference in Auckland this month, hosted by the Yacht Research Unit, and the Royal Institution of Naval Architects (NZ branch). The conference coincided with the Auckland stop-over of the 2011-2012 Volvo Ocean Race. […]

  Australia remains New Zealand’s largest trading partner with 23% of our merchandise exports being sent across the Tasman in the year to June 2011. However all is not rosy with many Australian companies in the manufacturing, building and retail sectors who are challenged by Australia’s high exchange rate as well as reduced domestic spending. This has been adversely impacting some NZ manufacturing companies who have faced suspended orders of capital equipment, demands for longer payment terms or increasing requirements for advance payment bonds from their Australian buyers. Over the last year, the New Zealand Export Credit Office (NZECO) has been assisting several manufacturing exporters to overcome these challenges and secure their export sales. Advancing postponed orders One example was Robotic Technologies Limited (RTL), a joint venture company between Scott Technology and Silver Fern Farms, which designs and manufactures automated meat processing equipment. RTL had a prospective Australian buyer in the meat processing industry that wanted to utilise equipment finance to purchase RTLÕs robotic processing system. To advance the sale, RTL offered a 5 year vendor finance option to the Australian buyer which it accepted. Under this arrangement, the Australian buyer paid an advance deposit and then waited until receipt and acceptance of RTLÕs equipment before making the first of its repayments over the following five years. This arrangement was funded by RTL’s New Zealand bank, and underwritten by the NZECO. The benefit to the Australian buyer was that it received a line of credit for equipment finance, while preserving its own banking funding lines, with repayments beginning once the equipment was operational and generating revenue. A key benefit to RTL was that it advanced a sale that may otherwise have continued to be postponed. The NZECO’s commitment to this deal was conditional on it obtaining full financial information from […]

Catherine Beard There is no denying that manufacturing in New Zealand has suffered as a result of the global financial crisis, just like many other countries. But, it’s imperative to realise that we have come off better than most, recognise what we can do to improve New Zealand’s situation and leverage our advantages in the global marketplace. What happens in manufacturing matters to New Zealand because manufacturing is still a big employer – the biggest in the Auckland region, and second largest in the country. It accounts for nearly 50 per cent of New Zealand’s exports. Manufacturing as an employer has been fairly static over the last three years – bumping along in very slight expansion mode, but the key message is that the backward slide (over the whole sector) has stabilised somewhat. So, the questions to be asked are, “What can New Zealand do to grow its manufacturing sector?” and “What can we do to get more people off welfare and into more manufacturing jobs?” We need to tackle the problem from both ends – demand and supply. Growing the manufacturing sector and creating more jobs will pull more people into manufacturing, but we also need to make sure there is a good supply of qualified manufacturing workers. The challenge of getting people off welfare comes down to ensuring those people are work-ready and jobs are available for them. When the economy is growing slowly and there are not so many new jobs being created, the people most affected are the unskilled and school and university leavers who are looking for their first job. Also in tough economic times, people are more inclined to hang onto to their jobs, so there is less movement amongst jobs. While things might seem tough in NZ, they have been tougher in other […]

By Bruce Goldsworthy Recently the government rolled out the initial stages of its welfare reform programme requiring beneficiaries at least to look for work. Not surprisingly many people asked where are the jobs these people are supposed to get? With unemployment at 6.7 percent, they said, where are the jobs for those genuinely wanting to work, even semi-skilled people, let alone those with few skills? Let’s make some things clear. There’s absolutely no shortage of work! It’s a truism the world is full of it. In fact there are vast resources of work, of great value to the community, or for private purposes, provided someone is willing to pay for it. The last point is of course the flaw in the argument. Though there might be useful work waiting to be done, often there is no money to pay people to do it just now, or organise the doing of it. It follows if more money was available more jobs could be created provided the products or services resulting from it were sufficient to encourage someone to pay for it. So how do we make the sort of jobs that generate products and services for which there is a market value equal to or exceeding their costs of labour and other inputs? For thousands of years the world’s wealth has grown as our adventurers and entrepreneurs have expanded our horizons, markets and market choices. The innovations they developed and the successful risks they took have been the main engine of our steadily rising standards of living. Such processes are not about to stop, but they do need revisiting and the processes themselves can require re-inventing. Let’s consider the Auckland waterfront. We hear from the two companies contracted by the port to supply labour that they have been inundated with applicants […]