High currency can be controlled - union

A Government-guaranteed affordable loan scheme for export businesses could help New Zealand businesses overcome capital scarcity and lead to industry growth, the Parliamentary inquiry into manufacturing heard today.

The inquiry was set up by the Greens, New Zealand First, Labour and Mana parties in response to what they term a manufacturing crisis which they say has seen thousands of manufacturing jobs in New Zealand lost.

A third public hearing held in Auckland today heard from local employers, manufacturers and unions including the First Union.

MPs Winston Peters, Russel Norman and David Parker were among the Parliamentary representatives present from the opposition parties. No members of the public attended.

Robert Reid, head of First Union which represents about 27,000 workers, told the inquiry workers had been paying the price for government inaction on manufacturing and outlined several policy options which he said could help the industry.

The union has long bemoaned the Government's monetary policy and the high New Zealand dollar was again a focus today with Reid lamenting New Zealand's "hands off" approach.

He said the manufacturing industry could not stabilise and grow while the dollar was so high.

"A high dollar is not a natural phenomenon over which we have no control as it is often being painted," he said.

Manufacturers were forced to play roulette with currency traders - and were losing, Reid said.

A refusal to target speculative currency traders, or institute a financial transaction tax or other measures needed to be investigated to slow "cash washing" in and out of New Zealand, he said.

Reid said government procurement programmes should focus on creating jobs not saving money for the Government.

The Government's five new principles for procurement released in December contained only one line commenting on New Zealand suppliers and he said this country's competitors were doing much better.

Reid outlined six measures which could immediately be undertaken by Government to "address the crisis" including reviewing its monetary policy and requiring the Reserve Bank to intervene in the currency market, investigate introducing a lower domestic log price, introduce a job support scheme for wood processors, and ensure New Zealand lumber was used in the Canterbury rebuild.

Government officials should also work to get more wood products exported particularly into China and fast-track funding for research and development projects, Reid said.

Plankwall managing director Scott Yates' presentation focused on access to capital. Plankwall makes display and merchandising systems from a factory in Auckland.

Yates told the inquiry his company had opportunities to to develop products almost "100 per cent NZ" but needed funding to do so. He promoted the re-introduction of a research and development tax credit to overcome this issue.

He supported a higher rate of depreciation to "preserve working capital" and an affordable loan scheme to improve access to capital.

Canada, Hong Kong, India, Thailand and the US were among our trading partners which used affordable loan schemes for businesses with Australia's Headway Scheme, effectively a generous loan scheme for exporters.

"Our principal Australian banks are risk-averse and reluctant to lend to New Zealand manufacturers and exporters," Yates said.

The lack of capital available to the industry needed to be recognised and remedial support such as an affordable loan scheme put in place.

While the details of such a scheme would be debated, Yates said any scheme should be a back-up to traditional sources of funding with the Government perhaps providing a guarantee to a manufacturer's bank.

A fraud alert scheme would also need to be put in place with tough penalties, as they have in Australia, Yates said.

The hearing continues this afternoon.