'There's no crisis in manufacturing' – Key

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'There's no crisis in manufacturing' – Key

3News NZ

John Key says printing money will push up the price of everything (file pic)

John Key says printing money will push up the price of everything (file pic)

By Duncan Garner

John Key spent the morning visiting a small local manufacturer of steel products.

They sell locally rather than export, and that's why Real Steel is the real deal. The high Kiwi dollar isn't hurting them, it's helping.

They've recently invested in a new steel press. But their take on the economy? It ain't flash.

“I wouldn't say it's strong," says Real Steel managing director Luke Mathieson. "Some guys are doing well, some aren't.”

Exporters are hurting because of the high Kiwi dollar, and the Greens say it's a crisis. But that’s something Mr Key has denied repeatedly today.

“There is no crisis in manufacturing in New Zealand,” he says. “I don't think we have a crisis. We could talk our way into a crisis but I'm not convinced we have one.”

But the Government's quarterly employment survey shows almost 40,000 jobs have gone in manufacturing over four years due to the recession and the rising dollar.

The Greens say the answer is to print $2 billion, lower the exchange rate and make life easier. Our main trading nations are all doing it. The United States has tried it three times, printing trillions of dollars.

Green Party co-leader Russel Norman says we’re being left out.

“If you sit and do nothing we will become casualties in the currency war,” he says.

Mr Key had this reply: “Let’s print lots of money and give it to everyone for Christmas […] in reality it's a fool’s paradise.”

Mr Key says printing money will push up the price of everything.

“It adds to inflation and will put up the price of everything from your mortgage to your power.”

However Dr Norman disagrees.

“If you look overseas it hasn't led to inflation.”

Labour leader David Shearer agrees that monetary policy needs to be addressed, but wouldn’t be drawn on the Greens’ printing money policy.

“We think monetary policy needs to be looked at. We think it shouldn't be in the hands of politicians. We think it should be in the hands of the Reserve Bank,” he says.

“We need to look at the exchange rate. It's killing our export businesses, but we think it should be done by the Reserve Bank.”

Labour appeared to end the day fence-sitting, not wanting to be closely aligned to the Greens, but at the same time, calling for change.

However Mr Key is adamant, saying we should leave the economy as it is and that any tinkering would be madness.

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Comments

21/10/2012 3:38:41 p.m.

Rob wrote:

Mike this is an article about manufacturing. Your comment about raising productivity to raise wages is staggeringly ignorant. Globally, the countries with the highest manufacturing output are the countries with the lowest wages, that's why stuff gets made there. Gary illustrates this point well.

13/10/2012 7:51:58 a.m.

gary wrote:

i use to have 6 staff , i use to export to Aust. Now china & chile have wipe out my market they are cheaper than i can buy the raw material .every where u look small buss. is just hanging on with local work i have diversified 6 times now but the cost of power rent wages council rates insurances are killing my industry , who wants to set up in buss in timber manufacturing ? what do u make that theres any money left in,there use to be lots of things made in Nz , people had jobs kids had after school jobs. we once had a life , now we have free trade how has it benefited sure you get cheap clothes ect but uve only got to look at our tips to see were the suff ends up, we have lost our industry to cheaper nations with low labor cost , how many off u out there have bought something that looked ok only to find out it was junk and made in china. every 1 is looking for a way to cheapen there product to save a cent to make a profit but at our expense,why are the average Joe leaving for a better life. what do u think NZ?

11/10/2012 8:46:04 a.m.

Mal wrote:

@MIKE. NZers need a liveable wage. People are on the bones of their backsides.

10/10/2012 9:46:19 a.m.

Mike wrote:

NZ needs to get out of the raise the wages for no reason cycle.

Raise wages for no reason does nothing for NZ but inflation.

Increases in productivity are the things that raise real wages while lowering costs, ie get more money while paying less for stuff.

Take NZ farming, herd sizes well over 300 with ave 1.8 people (ie a family unit) to run it. In the EU the ave herd size average is around 30 with some EU countries ave herd size as low as 10 cows while still requiring around the 1.8 people. Its this herd size more than anything else that has made NZ cheaper than the rest of the world, and even if wages paid to farmers were double, they would still be cheaper! If take the cost of grass vs grain, yes grass is cheaper, but it is also less productive, and the difference is not that big. Much of NZ dairying now uses some supplements like grain or other stock feed, ie NZ is not just 'grass'. The big difference is the labour costs (driven by herd sizes), as with just about every industry.

NZ min wages were in 2008 around 35th in the world, ie amoung the lowest in the OECD. In 2011 they were up to 9th in the world, and with some just above us dipping with the EU crisis, we are currently around 5th highest. This doesn't mean NZ has it easy, just we are doing much better than most of the world.

The US is lowering real incomes through their print money scheme, and their min wage was $7.25 US or $9 NZ, while our min wage is 50% higher at $13.50 NZ.

NZ can't afford more wages in a recession for no productivty increase. Lowering min wages politically unacceptable, hence Labour/Green back-door reduction through devaluation/inflation to reduce real wages. Better to just not raise them and address other costs, like housing which have risen due to Labours RMA strangling housing development and giving Auckland a housing shortage and driving up prices. More housing = bit lower prices and easing of the tight conditions for low/middle income earners.

9/10/2012 7:15:36 p.m.

M Bublitz wrote:

@MIKE. Fonterra has an advantage most other dairy producing nations do not, we can grass feed our stock year round and do not have to grain feed. However I agree that companies in NZ don’t spend enough on research and marketing and are resistant to change.
With regards paying our workers too much, if you have a small wage pool you have reduced consumer spending which damages our economy.

9/10/2012 2:18:29 p.m.

Bruce wrote:

$100 says that in a months time Key will be admitting there is a crisis. Nothing he says holds true.

9/10/2012 11:17:25 a.m.

Mike wrote:

@Vicki the redundancies are in industry where NZ productivity is amoung the worst in the world.

NZ needs to fix that. Devalueing our dollar wont fix it, neither will a round of heavy inflation.

The carpet industry, Summit Wool Spinners (Omaru) has reduced jobs, as has Cavalier (Norman Ellison Plant in Onehunga). Okay, so it sounds like we have a problem and maybe its our strong dollar? Well lets look a bit deeper. The flooring industry has been moving away from woolen carpets for 3+ decades so that has generated less demand and job losses, including about 10 major carpet manufacturer and retailers going under, including Feltex - and most of those failures happened before National came in in 2008. So there is an industry problem that is unrelated to our dollar.

We also import woolen carpet from Australia. Now Aus has higher wages, higher dollar, added transportation costs. So how is it Aus can make woolen carpets cheaper than NZ? Its because the NZ productivity is too low, and we need to increase our productivity to be competitive.

No business can afford to be stagnant and ignore markets and the world. Kodak did this with the introduction of the digital camera. The result is Kodak closed its doors as it failed to act on changes. If Kodak had adapted to the changes, it still would be a major player today vs out of business.

NZ has had too many unionised workforces that have been playing ostrich and ignoring changes, and this has cost redundancies. Business is fluid and ever-changing and needs to adapt. Fonterras predecessor built the world largest butter mountain when they ignored the market and kept producing butter. We then sold that mountain off losing billions to the Russians who paid ~ $700 mil for it. Since then Fonterra has not repeated the mistake and is highly sucessful as they adapt to changes vs resist them. NZ needs to get with the changes in the world, not moan about them. Even Fonterra makes mistakes, but they learn from them.

9/10/2012 9:53:47 a.m.

Mal wrote:

There's no crisis in manufacturing? So why are the many losing their jobs. Another blatant lie. It wont wash Key. Its one lie after another. Time you stepped down. People have had enough of the spies lies and alibis.

9/10/2012 9:24:06 a.m.

Vicki wrote:

@mike please explain therefore why everyday we hear of more people (sometimes hundreds) being made redundant in manufacturing....? If things were going well then this certainly wouldn't be the case.

9/10/2012 8:53:15 a.m.

Mike wrote:

There is substantial manufacturing in NZ.

High-tech Manufacturing is growing through doing things better.

Fonterra is leading Dairy companies in added value through manufacturing.

Unions have taken pay rises through profitable years for no reason, so they could help things by taking a pay cut in recession to save jobs. Unions value lost jobs higher than working with business to save jobs so that wont happen.