High kiwi & interest rates risk hollowing out manufacturing

By NZPA

Friday 27th April 2007

Manufacturers warned today the sector was in danger of being hollowed out in the face of a high dollar, high interest rates and rising costs largely imposed by Government.

Following yesterday's announcement that premier manufacturer, Fisher & Paykel Appliances, plans to shift 350 production jobs from Auckland to Thailand, another major Auckland manufacturer said today it planned to move to China.

Sleepyhead joint managing director Graeme Turner said it had already shifted some of its 600 staff offshore and planed to move lay off 250 of its Auckland workers as it shifts manufacturing to China in a year.

Turner, who with his brother Craig shares a $70m fortune and who last year fought a public battle to keep ailing carpet company Feltex in New Zealand hands, said the only thing to keep the factory in New Zealand would be a drop in interest rates and a change in Government policies.

Yesterday, the Reserve Bank raised interest rates for the second time in as many months and the 11th time since the start of 2004.

New Zealand already had the highest interest rates in the developed world. The move sent the New Zealand dollar back to within a whisker of its highest level since it was floated in 1985.

Turner told Radio New Zealand China was the lowest cost base to manufacture and had an array of incentives to move there.

"They talk about a free world, but China offers incredible incentives to go and manufacture up there. I personally think it's crazy because the same incentives should be offered here to keep manufacturers here."

F&P managing director John Bongard said incentives, including an eight-year tax break, and low labour costs were big factors. He said the environment for manufacturers was "unfriendly". He warned all 1600 jobs at F&P were under review including design, research and development positions.

Canterbury Manufacturers Association chief executive John Walley said manufacturers feel abandoned.

"If you ask me one word that sums up the way people feel, it is `abandoned'," he told Radio New Zealand.

"There are no policy supports for manufacturers. There are no broader policy concerns for the export sector."

He said the loss of the F&P jobs would reverberate through Auckland.

"There will be goods and services supplied to that operation, maintenance, equipment supply, services in the technology area, relationships with universities and education systems.

"All of those relationships will disappear as the activity goes offshore."

Council of Trade Union president Ross Wilson said manufacturing was in crisis.

The Auckland decisions come on top of large lay-off announcements from three large Christchurch manufacturers -- GL Bowron, Click Clack and Whisper Gen -- this month.

All three blamed the high dollar as a major contributing factor.

Click Clack chief executive John Heng said other Christchurch firms are poised to lay off staff.

Heng slammed the Government for failing to give the Reserve Bank tools other than the blunt instrument of interest rates to control monetary conditions.

Deborah Roseveare, who heads the OECD's New Zealand desk, told NZPA the huge cyclical swings of the New Zealand dollar and New Zealand's persistently high interest rates were partially responsible for a lack of exporting and declining relative living standards.

The volatile currency had put businesses off going into exporting, while high interest rates made business propositions less viable.

The Alliance and Green parties blamed pro-globalisation policies for the job losses.

Green Party economic development and employment spokeswoman, Sue Bradford, said the Reserve Bank was throttling the productive sector. Economic Development Minister Trevor Mallard said "these current challenges" are being felt "around the Western world".

Manufacturers "are feeling the effects of the huge growth in low cost manufacturing out of China, East Asia and India," he said in a statement, adding that impact was compounded by "the low US dollar".

Reserve Bank governor Alan Bollard has refused to answer criticism.

In a brief statement explaining his decision to hike interest rates yesterday, he said the dollar was at an exceptional and unjustified level.

He acknowledged some exporters faced "challenging conditions" but said the recent sharp lift in world dairy prices would boost the sector.

Comments from our readers

No comments yet