By Bernard Hickey
The Opposition's inquiry into manufacturing has released a report recommending a new monetary policy, but has not included details of any new policy, other than to say it should reflect a 'new orthodoxy' developing overseas.
The inquiry by Labour, Green, NZ First and the Mana party said any new government should "adopt macroeconomic settings that are supportive of manufacturing and exporting, including: a fairer and less volatile exchange rate through reforms to monetary policy; refocusing capital investment into the productive economy, rather than housing speculation; and lowering structural costs in the economy, such as electricity prices."
It recommended tax credits for research and development as part of a package to support "innovative manufacturing, supporting exports and quality jobs."
It recommended any new government adopt a national procurement policy that favoured New Zealand-made products.
The 40 page report was written after an inquiry was launched in October last year into the state of the manufacturing sector and concerns a high New Zealand dollar was hurting jobs in the sector.
It heard submissions from manufacturers and others in 4 hearings over January, February and March.
It received 128 submissions. Manufacturers employ about 12% of the workforce and jobs in the sector have fallen from around 235,000 to 190,000 between 2005 and 2012.
"A strong consensus across submissions rejected a 'there is no alternative' approach to economic settings and implored government to consider other settings," it said.
"The inquiry accepts that a re-assessment of macro-economic settings in New Zealand is long overdue, and that the 'new orthodoxy' offers an alternative policy framework in which the manufacturing sector is more likely to prosper," it said, without detailing what that framework was.
Other recommendations included:
- The tax system is used to boost investment in new technology and machinery. An accelerated depreciation regime should be implemented for the manufacturing sector.
- A wide range of funding is available for manufacturers to invest in their business and employees. Measures to encourage the availability of venture capital and mezzanine funding should be continued, including government funds through commercial-managers.
- Businesses are supported to achieve 21st Century organisation and practices. Policies such as NZTE’s focus on Lean Management, and the work of the High Performance Work Initiative should be extended. Apprenticeship training support for the sector should be reviewed immediately.
- Manufacturers are given a voice in FTA negotiations. From the outset of FTA negotiations the interests of manufacturing must be explicitly addressed. Negotiating teams must keep the sector informed.
- Measures to encourage foreign direct investment in manufacturers should be consistent with the strategic direction of New Zealand’s manufacturing and exports.
- Government should lower compliance costs wherever they can be consistent with maintaining New Zealand’s values including workers’ rights, environmental standards, and product quality assurance.
- Manufacturing’s ability to create jobs and boost exports should be recognised in national, regional and industry policies.
- Taskforces of government local government, businesses and unions, be established to assess and act on new business and job opportunities in the wake of major closures or restructuring in the manufacturing sector.
Political reaction
The Engineering, Printing and Manufacturing Union (EPMU) said the government should drop its planned changes to employment law and adopt the recommendations of the inquiry instead.
“This is a clear alternative to the Government’s failed hands-off approach, which has seen our manufacturing sector fall into crisis," EPMU national secretary Bill Newson said. “There are now 40,000 fewer jobs in manufacturing than there were four years ago, and on Friday alone we saw 84 highly skilled aircraft engineering jobs go at Safe Air in Blenheim because of failed Government policy," Newson said.
The EMPU said there had been mass redundancies in the last year at Dynamic Controls, Rakon, Solid Energy, Norske Skog in Kawerau, the Tiwai Point aluminimum smelter, Axiam Metals, Nuplex Industries, Aquaheat, Flotech, Summit Wool Spinners, Norman Ellison Carpets, Goulds Fine Foods, Fisher & Paykel Appliances, KiwiRail, the Christchurch Engine Centre, Geon, Carter Holt Harvey, Telecom, Contact Energy, Mainzeal and Safe Air.
Green co-leader Russel Norman said the release of the inquiry's report was an historic event. "For the first time, we have half the parties in Parliament signing up to an alternative economic vision for New Zealand," he said.
Economic Development Minister Steven Joyce said the Inquiry was a failed political stunt "with a bunch of re-tread solutions and a lack of knowledge of the measures the Government is already implementing."
“Labour, the Greens, New Zealand First and Mana are determined to manufacture a crisis in manufacturing. The massive problem for them is that while individual firms face real challenges at different times, no crisis exists,” Mr Joyce says.
See the full report attached here.
(Updated with more details, link to full report)
28 Comments
What was the last PMI released last week Norman Parker?
So the manufactured manufacturing crisis has manufactured little detail, ha ha ha.
Especially had to laugh at a LAB/GRN/MANA/NZF wanting to reduce compliance costs after their bleating about the RMA in the past 2 weeks. Having Hone as part of the mix makes this a joke right? He wants money for nothing for the bros.
Overall, NZ Inc is doing quite well, (can be better), these economic gurus are just fiscal fools and if NZ elect this assembly of communists in we deserve the third world status we will get.
Russel's solution, kill the cows and make windmills instead. Real heavy subsidies needed here if report from UK is to be believed..
It is a joke. NZ is doing a lot better than these clowns will admit. Look at things like the PMI released last week, 58% meaning a massive increase in manufacturing. I give this more credence than a group of loony lefties having a perscription for a better economic future.
The Greens have based a lot of their fundamentals on Global Warming and this ain't happening.
Here is an example of Greens type BS from one of Russel's favourite countries, http://en.mercopress.com/2013/06/16/venezuelan-government-turns-breast-… - this is all to do with price controls as their closed economy is stuffed, not children's safety. A billion Chinese wanting our milk products cannot be wrong, surely even dye in the wool socialists can see this! 2 weeks it was a shortage of toilet paper!
Good luck thinking about the fairy land you want, but a rabble of commies and activists won't give you this, excep in your dreams.
Am intrigued,
Can you point to any reference where Russel Norman has quoted Venezuela as a role model for anything economic? Or indeed anything at all?
If he really is looking to model us on them, then that would indeed be a worry.
If he is not though, then I'm afraid your credibility has decreased considerably by making such a statement. Will look forward to the links.
Otherwise your PMI statement could have legs, although I think can be challenged on the details.
Nationalisation of electricity and using an assumption using my brains. Norman & Chaves were/are cut from the same cloth, except Norman has not been able to have the baubles of power.
An example of what happens when you tell producers this is all we are going to pay you.
Blind faith SL I am afraid if you think LAB/GRE/MANA/NZF is the answer.
Status - think big-picture (which I don't think Norman does, at least, not publicly).
Left to it's unfettered devices, the free-market produces bigger and bigger corporations, the only goal of which is to get yet-bigger. That bespeaks a rapidly-reducing range of options, and a rapidly-increasing need to move into arenas not already owned.
This means divesting from the bottom-end up, which is exactly what we see with the banking sysyem, an with almost everything not regulated. The corporations have knobbled Govts (IMF, World Bank), hold them in fear via ratings agencies, and do all kinds of anything for profit. Currently, much of this is backed by the Empire-du-jour, the USA. You don't have to dig too far, or to be biased at all, to note that what they do has little to do with 'the land of the free' (and it's further interesting to note that here, we'd more likely say 'fair' (think: fair go) than 'free' anyway).
Anyone going up against the Empire-slash-corporate-juggernaut, is promptly labelled. Communist, in the case of the fellow who pushed the corruption out of Cuba, Terrorist in the case of folk who lived on top of oil (and precious little else) when they hit the Twin Towers.
If you get fooled by hype/propaganda, you've lost it. Regardless of what else those folk do/believe, all they've done is attempt self-determination (which is surely for them to decide on), and been slanged-off by the biggest propaganda machine the world has ever seen. Not to mention embargoed, destabilised, threatened...........
Which makes that whistle-blower in Hong Kong one of the better human beings on the planet, en passant.....
The blind faith sits with you, I'm afraid, TBS. The Greens Labour proposal on electricity is not to nationalise the industry; it is to fix a proven failed monopoly market model; that while nationalised as it has been for 100 years, has arguably not mattered. The model I understand Labour Greens would like to implement is modeled on North America; not a Venezuela in sight.
You seem to have blind faith in the current monetary regime, even though most of the world has abandoned or at least materially adapted a similar model over the last 5 years in particular.
The inevitable result ot the current settings is a very high current account deficit; very high private indebtedness; loss of ownership, loss of wealth to New Zealanders. If you can demnstrate otherwise by all means have a go.
The increase in the PMI is almost inevitably manufacturing for the house building industry. Not in itself bad. But if that is done by sacrificing idnustries and skills that will long term deliver income to the country, then that seems far from ideal. And a decision that should be done openly.
If National have a vision, (and they are useless at communicating it if they have) being as complementary as I can, it is for NZ:
To have reasonable infrastructure of housing and roads; albeit car focussed. (We also know they're not all that flash at the housing bit, even if it is ramping up now)
Farming, primarily dairy, will be pretty much the sole source of foreign exchange.
Ownership of any assets (including the dairy farms) by New Zealanders is not important- and therefore will diminish progressively.
New Zealanders long term incomes will gravitate down to a global average.
Paying for a good lifestyle will be subsidised in perpetuity by selling foreigners the right to come and live here.
By all means challenge this vision; but that's how it looks to me.
Be careful making assumptions.
Qualify them. Set them out in black and white.
Farming, primarily dairy, will be pretty much the sole source of foreign exchange. Ownership of any assets (including the dairy farms) by New Zealanders is not important
Really?
Australia is currently going through a re-evaluation of that very same thing (after the horse has bolted of course) .. so learn from their mistakes
The mining boom is over .. is has been going for 10 years as the Big 3 international miners were in the establishment or development phase, bringing in vast amounts of capital and equipment, which shows up as foreign exchange earnings and GDP. Now the establishment phase is complete, and the now established mines move into the production phase, and so the "country" began to look forward to the export income from production, for the next many years. But alas .. as they now realise the Big 3 are all overseas owned and managed, and all the export contracts are written in USD and the revenue will flow to UK and EU as the profits are taken out in dividends. The Capital inflow and Development Labour flow has ceased. All the equipment will be driverless. No employees earning incomes and paying PAYE taxes. Yep they have just woken up. The big anticipated windfalls were illusory.
So, in my opinion, it is essential to hang on to as much ownership as you can, before you lose ownership and no longer own it. Instead of getting $100 from $100 of exports you will get only $10 out of $100.
Assumptions, so you really mean smears of make believe only available inside your head.
or we could read that,
"It recommended tax credits for research and development as part of a package to support "innovative manufacturing, supporting exports and quality jobs."
It recommended any new government adopt a national procurement policy that favoured New Zealand-made products."
I see neither as anti- NZ business....
regards
Why don't the private enterprise bods push for the state controlled RBNZ central bank to take the brakes off the emergency level OCR setting?
True independent capitalists should detest communist type interference in what should be market based price discovery mechanisms - career public servants have no place in the world of finance or business, just as taxpayers deserve no place in the financing of good private enterprise initiatives.
True independent capitalists should detest communist type interference in what should be market based price discovery mechanisms - career public servants have no place in the world of finance or business, just as taxpayers deserve no place in the financing of good private enterprise initiatives.
Yes... U are right...
a fairer and less volatile exchange rate through reforms to monetary policy; refocusing capital investment into the productive economy, rather than housing speculation; and lowering structural costs in the economy, such as electricity prices."
Sounds good... but the devil is in the detail.. How do they plan to do this.? Are they going to go back to "first principles"... and try to get an understanding of these things.... or are they going to simply take the .."band aid" approach..... and treat each "problem" in isolation...
Monetary policy... non tradable inflation... productive sector... exchange rate... interest rates.... etc ...are all interrelated.
Maybe Labour has a new.. "Roger Douglas" type who can offer a paradigm shift rather than just putting more plasters on symptoms... ( which just leads to bigger problems latter )
Wally - often you're right, but this time the fact that you're right makes you rong.
If folk didn't want Cuba to go the way it went, maybe they should have kept the mob and the corruption out of there, particularly post WW2. The locals were getting screwed, and in more ways than one.
Their big problem - and it hit North Korea at the same time - was the removal of Russian energy supplies, and an embargo on replacement from anywhere else. You may not have heard, but without energy, f-all happens.
They did quite well (the comparison with NK is a rewarding study) and if we go down the energy-descent path as it looks like we are, it's a warning, blueprint and reference-manual, of what to expect. Ideology never made a blind bit of difference to the value of a calorie or a joule.
"Calorie or a joule"...not sure about those ethnic groups but hey post the Cuban revolution when the thieving swine were booted out...what really happened?....did freedom arrive...or was it not worse swine in different garb!....Let the current excuse for an opposition in NZ get their fingers on the Treasury and it'll be a quick march right back to the socialist/marxist madness of last century.
Tax credits for R&D do not work.
They are a win for consultants who prepare the tax credit claims and nothing else. The cost of preparing the claim is usually slightly less than the claim itself.
Stop the nonsense and give targeted R&D handouts. The current govt does this and it could be scaled up dramatically.
Or more Crown Research Institutes and University research units to provide kiwi businesses with ideas and technology to bring to market in return for equity or proportionate contribution to research cost. There must be massive waste of talent and creative energy in our graduates that is disappearing overseas for want of research jobs.
The following article in the Torygraph (ironically chief cheeleaders for the ruling conservative party) clearly is calling for different monetary emphasis there, even though they have already stretched their inflation target; and more importantly, they have printed with gusto to not only fund their fiscal deficit, but also to remain competitive.
The author of Monetary parallels in the UK would clearly like them to go further.
A couple of excerpts seem especially pertinent.
in fact just like the traditional British recovery that ends in tears: rising house prices, rising consumer spending and a widening trade deficit. Indeed, precisely because of that, companies may not invest heavily as the recovery gathers steam because they are not convinced of its longevity. It could be argued that in today's circumstances, unsustainable growth is better than no growth. Indeed, as far as the fiscal deficit is concerned, a consumer-led recovery is apparently a good thing because, pound for pound, it means more tax revenue than one driven by exports (which don't carry any VAT or excise duties).
Moreover, what starts off as unbalanced may become more balanced when corporate investment and net trade pick up later on. Bearing in mind our history, though, you would be ill-advised to bank on it.
What, if anything, could economic policy do to make the recovery more sustainable? The most important issue concerns the exchange rate. The UK has had a deficit on trade in goods and services for years. Last year it stood at 2.3pc of GDP. Traditionally this was largely made up for by a surplus on net investment income. Over the past several years, however, that has been nowhere near sufficient, so we have run a large overall (current account) deficit.
In New Zealand our current account deficit is much worse; and our housing as a source of wealth dependence is even more stark.
An aside to the story seems to be that Winston is very much tying his flag to the Labour Green mast, rather than flirt too much with the Nats. He could always untie it of course; but that seems unlikely unless National do in fact open their eyes to how monetary policy is now being played around the world. While Labour and the Greens presumably will keep options open for him and NZ First.
Maybe he will only take votes from Labour; but I doubt it. Labour and or the Greens may scare some people off when their policies are made public; but again I doubt it. Government in waiting, I would have thought.
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