Job losses inevitable in declining industries, say ministers

Bill English: Job losses regrettable but probably unavoidable

Currency intervention as advocated by a business group and opposition parties would cut New Zealand living standards, the government says.

The Manufacturers and Exporters Association, New Zealand First and the Labour Party are urging the government to do something about the high New Zealand dollar.

Earlier yesterday the business group advocated the government intervening over the head of the Reserve Bank and devalue the New Zealand dollar to US60 cents.

Both Finance Minister Bill English and Economic Development Minister Steven Joyce yesterday afternoon defended the government against a concerted attack on the issue.

Recent job losses in the manufacturing sector are “regrettable but probably unavoidable”, Mr English told parliament, while Mr Joyce accused the opposition parties and the association of “seeking to prop up declining industries” and “seeking to bet against world financial markets using taxpayer funds”.

Questioned by New Zealand First leader Winston Peters why he would not do this, Mr English said such an action would only drive living standards downwards and would not help the economy.

“We do agree there is a level of discomfort about the high level of the New Zealand dollar but we certainly do not agree with the view held by the Manufacturers and Exporters Association that the dollar should be devalued to around US60 cents,” Mr English said.

Such a move would imply devaluation down to Australian 58 cents, he said, and the combination “means a drop of income and living standards of about 20% in New Zealand".

“If they think there’s a gap in living standards now ... that gap would widen to a chasm and thousands of people would be leaving for Australia because of its higher standard of living.”

Questioned over announced job losses from Norske Skog’s Kawerau pulp and paper plant, New Zealand Aluminium Smelters’ Tiwai Pt plant and other job losses in the export sector, Mr English says little can be done.

“All those job losses are regrettable but probably unavoidable.” 

Net new jobs are up 50,000, he says, with the prospect of net 150,000 more new jobs over the next four years. That meant some job losses as the economy adjusts, but new ones would more than replace lost jobs.

Mr Joyce re-emphasised that when Labour economic development spokesman David Cunliffe asked about job losses.

They were inevitable at Kawerau as newspapers are being replaced by iPads and other electronic devices, he said.

“I appreciate the member is seeking to prop up declining industries but we don’t see that as the way to go.”

Currency intervention along the lines advocated by the Manufacturers and Exporters Association would only see a drop in living standards – Mr Joyce says it will be 25%, rather than the 20% figure given by Mr English.

That will be made up of higher fuel and other import costs, he says. “I can’t think of a more destructive policy for this country.”

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25 Comments & Questions

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No growth National

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Very disappointing government, I feel like they are just 'phoning it in' year after year. Having said that, I will vote for them again, because there is no alternative to National. But they are just so utterly disappointing aren't they?

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If we pegged our currency as China does we wouldn't be in this position our exports would be stronger and our wages higher.

But the NZD is one of the most speculated currencies traded and because of this artificial demand our currency is artificially high.

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Currency goes down petrol and imports go up prices get more expensive people get poorer.

Currency goes up exports go down people get poorer.

Can't win either way. Just have to have products that everyone needs and wants and are prepare to pay a premium for. That's the only way to win.

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Totally agree, you have to innovate products that the world actually wants and is willing to pay a premuim for.

We are a technology exporter who has kept all of our manufacturing in NZ. We have traded on the fact that our products are NZ designed, developed and maunfactured and therefore we can guarantee the quality and minimise clients risk of product failure (and expensive downtime). Innovation and quality has enabled us to command a premium price for our products which international clients are happy to pay.

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I agree with you except for the "pay a premium for" as the state of the world economy indicates people are not paying premium prices and are seeking better value. It may have been the case that people would pay a premium, but as the world economy continues to contract, people will be more interested in vale for money than 'premium' priced products, unlless there is quantifiable value in that premium price.

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A financial transaction tax is the answer to this money speculation. NZ has nothing to lose with it.

It would bring the banksters into line, which seem to have way too much control of society.

We would then be left with industry that added value, rather than just destroying it.

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Reality is low-wage labour is now centralised in India and China, who import raw material to their processing plants. This has been happening for the last 30 years (sorry Labour and Greens, you must have missed it). And when demand drops globally, production stops both here and in those countries (sorry Labour and Greens, you must have missed the supply and demand lectures). Propping up these industries, is just social welfare in another form, and the bulk of taxpayers no longer see value in adding to social welfare debt. Education is the future for NZ and, like the rest of the world (including Finland), national standards and performance pay for teachers is the first step in creating a fresh, non-union dominated education sector for the primary benefit of children.

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I disagree that 'education' is the future unless that means training more trades ad machinists. NZ has one of the highest rates of education, but that has not translated into better commercialization of the outputs. Everyone wants to do 'research' which ultimately has left NZ with a note worthy publication record, but a horrid track record of taking that to the market. The only way that research is funded is through government $$. This is not a solution.

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Comment of the day! Very well articulated Digby!

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A very skilled American money market friend remarked to me the other day... 'why do you Kiwis let your dollar be traded by every man and his dog and not clip the ticket... are you mad?'

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Remind me: which political philosophy is it that wants to control the means of production, distribution and exchange? Ask Dr Norman.

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oh dear - you poor old idealogue.

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A 1 % Financial Transaction Tax across all financial transactions will generate enough tax to supercede all our current taxation methods.It is mathematically superior, fairer,efficient and simpler than our current system. It is revolutionary but would be a world leader in this field.

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Look around the world - the only economies that have any strength are the ones that manufacture products and export them. We have been driven to being a service ecomony by certain economic ideologies and the pace at which our economy is disintegrating is actually gathering pace and that is why people are going to Australia. So very soon the Maoris won't need to sue for water and air, we'll have handed it back to them on a platter as the last white man turns off the light as they leave the country! Then watch NZ return to the Stone Age as everything the white man gave them starts to break down. Or, watch the Chinese come in and take over the country. To a certrian extent intervention is the answer for us at this stage, it's just how you go about it. I'm now in favour of massive State subsidies again to get manufacturing started here again, get exports up, create jobs so people don't leave permanently.

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The flaws in your plan are State Subsidies - they are only another form of welfare - propping up industries that are unprofitable in the current market landscape.

As for creating manufacturing jobs here in NZ to compete against labour costs found in China, India, SE Asia - you've got to be kidding or smokin' some good weed dude - 'cause NZ simply can't compete against labour costs in the developing world, compared to labour costs in developed countries.

Just ask the workers at the HillSide Rail factories why they lost out building trains for NZ... labour costs here in NZ are too high by comparission - and that's before Labour and the watermellons want to arbitrairly raise minimum wages by over 10% overnight...

Clearly, you have never owned a business and only ever collected a weekly wage?

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Same old from you Solidarity every time. Yes we can't compete against low wage economies but that is not a reason for us to become one like them

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I never argued to become a low-wage economy - but attempting to compete with the likes of China and India on wage costs will certainly not help the cause either!

What NZ Inc really needs is to be able to add value to products – either raw products or by improving existing products.

Or, we could take a really bold step and gain 1st mover advantage by producing quality and quantifiable medical marijuana products for the multi-billion world market.

Imagine Fonterra teaming up with co-operative growers to produce enough medicine butter to manufacture, package and export medical marijuana for seriously/terminally ill patients around the globe? This “medicine” could be used in baking, or on toast and would provide natural pain relief to millions.

Medical marijuana and it’s non-intoxicating sibling hemp have literally thousands of uses – from clothing, rope, textiles, soap, paper – imagine the boon to Coromandel and the Far North (and now Tuhoi) if this naturally growing herb was allowed to be cultivated and manufactured into legitimate, legal, health saving medicine?

Employment everywhere, increased taxes, entire new industry (above ground!) and the legacy of alleviating terminally ill sufferers of pain by ridding NZ of the massive hypocrisy we have regarding this natural herb… and that of tobacco and alcohol.

Doing what we have always done regarding marijuana – has never worked, it isn’t working and is not being effective at all. It only costs the tax payer and authorities billions to chase and administer… and it’s simply not working.

A more pragmatic approach is needed – corner the market and reap the benefits for all of NZ,

It’s about time NZ had a serious, fact finding debate on this subject – no emotive platitudes from religious or political fanatics – just the honest truth and facts and once the true facts are known, marijuana will be known as the “miracle plant” for all of it’s benefits, uses and ease of it growing everywhere – just like parsley…

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Solidarity,

You're the one smoking some good weed. I didn't say the subsidies have to be for the industries currently goin under. I like the Greens' idea of investing R&D, time and energy in the likes of solar and water power generation, becoming leaders in these fields (or some other field) in which we can manufacture and export components or entire finished products. Only then will we see our economy start to right itself.

As it happens I am a business owner, an employer AND a Chartered Accountant, so I think I know what I'm talking about.

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Always circular arguments on NBR, we must move past this business mentality if we are to advance economically.

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# 15 agree, but very easy to say that. It's back to basics time, as folks have said we need to make stuff that people want and sell it overseas for foreign exchange, again easy to say but not easy, I know I've tried. Human drivers are the key and the Government can help create those drivers because they control the tax system... for e.g. if exporters knew they would be paying less tax on foreign exchange earned providing a clear advantage over a strictly importing business then common sense says more people would try and earn money from exporting and that's just one thing or support in hiring workers in export businesses. Don't give me the stuck record of 'it will be rorted' if that's the case why would we try anything? We also need leaders who can express a vision for success that can actually speak to people, most of our munter pollies can't even string more than a few uninspiring words together or sound like girlie men (compare our lot with Clinton's speech to the DNC last week) We need a 'national call to action export step change' and don't tell me it can't be done because it can and we need to do it NOW.

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I wrote #15 above. Paul;, you're thinking too narrowly when you talk about the tax system. Our tax system is one of the leanest and simplest in the world. I know - I'm a Chartered Accountant and advise clients on it daily. Everyone focusses on the headline rates and grumbles they're too high, biut take a look at the US and Australia for example and you'll see all sorts of hidden payroll taxes on employers, for example. I think the government needs to be forward thinking and provide improved R&D grants for example - that's where we will make the economic advances, not lowering the company tax rate from 28%, nor from for example ACT's low, flat income tax and majhority of tax from a GST consumption tax. Our problem is we consume too much, innovate too little, moan about the Asian countries being too hard to compete against on a per hour wage rate basis and are basically strangling our own economy. Trouble is we are actually encouraging our innovators and doers to head off overseas to find can do centres and leave our own country to whither and die. A crying shame.

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“All those job losses are regrettable but probably unavoidable.”

I thought Roger Douglas had left Parliament!!

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He has left parliament. Fortunately there are still a few there who realise chnge is inevitable. Industries and jobs come and go. That's known as progress. It's the reason the blacksmiths' shops have moved from the main st. and been replaced with ipad retailers.

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The message I get is: join the new economy as the old one disappears.

Some dots can be very usefully connected between the two. For instance:

Dot 1: Rio Tinto is reducing old economy production and jobs at Invercargill and possibly going to sell.
Dot 2: the government is shifting to new economy cloud computing for its public services. It would like to go offshore for economies of scale and to access innovation, which would probably mean the United States.
Dot 3: Cloud computing requires a lot of electricity and a cool climate. Invercargill would be ideal. From here, remote, safe and neutral New Zealand could make itself an ideal cloud computing site for the region and the wider world, as Iceland is doing.

So, for instance, why doesn’t the government reactivate the Pacific Fibre investment group by joining it as a cornerstone investor for such a project?

The government should pause, and investigate. [See blog: Neutral venue for safe secure data services? @ http://www.village-connections.com/blog/?p=6482 ]

Mayor Tim Shadbolt has shown an interest in this possibility, and I imagine Meridian Electricity would be quite interested, too.

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