Govt must keep dollar under control

01:31, Feb 01 2013

Manufacturers continue to worry about the future with confidence about exports from the sector lower in December.

The concern comes as a struggling Oamaru wool yarn producer is sold with the potential for 150 or more jobs to be lost in the small town.

Godfrey Hirst subsidiary Canterbury Spinners is in the process of buying the Oamaru plant. The Australasian company yesterday said it had a conditional agreement to buy Summit Wool Spinners, a plant that employs 192 people.

Canterbury spinners intends to keep only a skeleton staff while it takes over the company.

New Zealand Manufacturers and Exporters Association (NZMEA) chief executive John Walley said the Government had to take a stronger role in providing policy settings to enable it to keep the strong kiwi dollar under control.

The Government was looking at things too generally in New Zealand rather than looking after smaller communities like Oamaru, he said.

"A metaphor is, if we're all stood in a swimming pool and the water level's rising the shortest people drown first," Walley said.

"What the Government does is maybe set the water level but it doesn't determine how tall everybody is.

"The effort the Government can do is lower the water level."

The latest NZMEA Survey of Business Conditions completed during January 2013, shows total sales in December 2012 decreased 5.35 per cent. Export sales decreased by 3.83 per cent with domestic sales decreasing 6.62 per cent, on December 2011.

The NZMEA survey sample this month covered $556 million in annualised sales, with an export content of 46 per cent.

Net confidence fell to -14, down from the 0 result reported last month.

Staff numbers for December increased year on year by 1.89 per cent.

"2012 ended on a negative note, both domestic and export sales fell year on year," Walley said.

"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."

Walley said the Reserve Bank yet again chose to keep interest rates at 2.5 per cent, 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 ...

"Government is fixed in its views and is ambivalent about the exchange rate, regardless of what the world might be doing. The idea that the Christchurch rebuild will offer some relief is correct but we need to keep a sense of proportion; the $30 billion rebuild impulse will be spread over a decade while exports amount to around $60 billion each and every year."