Expanding GDP encourgaing - deficit worrying

Canterbury Manufacturers’ Association.

23 June 2006

The Canterbury Manufacturers’ Association says that the latest economic figures must be seen as a clear warning for the New Zealand economy.

The Association says that expanding GDP, albeit at a slower rate, is an encouraging sign for the economy but New Zealand needs to address the widening trade deficit and promote value add into the tradable economy, particularly exports if we are ever to climb back up the OECD rankings.

“Growth in the economy is vital to New Zealand’s future as it is to all countries” says CEO John Walley. “But the real question is what policies might accelerate and drive the sort of growth that will attack the trade deficit on a structural as opposed to a cyclic basis”.

Mr. Walley points to increasing manufacturing sales, business investment and the development of export markets as vehicles for this process. However he says that issues such as tax relief and infrastructure are being used by the political parties merely for point scoring and that politicians should be working towards implementing the policy frameworks that are needed to enhance tradable performance.

“There is growth but is slowing. Only when policies are in place that encourages more investment into firms developing and exporting new products will reduce New Zealand’s dependency on the rest of the world funding New Zealand consumption.”

“The trade deficit problem drives the hawkish stance of the Reserve bank, makes hostage the living standards of indebted New Zealand to the exchange rates and interest rates associated international borrowing – there may not be much difference between 9.0% and 9.3% but the trend has to be a major concern to lenders”.

“The world will not continue to finance our borrowing and spending for ever. At some point risk will outweigh the return and credit will not be available at and sensible price.”

ENDS

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