MEA releases its latest OutLook report

MEA releases its latest OutLook report

The New Zealand Manufacturers and Exporters Association (MEA), has released its OutLook report titled, ‘Monetary Policy and Productivity’. The report is the third in a series published by the MEA examining the Association’s position on the policy settings that will support the productive sector and improve the productivity of the New Zealand economy.

“This report discusses the impact of New Zealand’s current monetary policy settings on productivity and suggests alternative approaches that would deliver sustainable long-term economic growth for our tradable sector and provide a way forward for our economy as a whole”, says Chief Executive John Walley.

The report lists several alternative policies available to the Government in reducing the amount of inflationary pressure in the economy. These might include:

• Mortgage levies controlled by the RBNZ.


• Capital Gains Tax on property transactions (family home excluded).


• Ring-fenced losses on property investments.


• Variable GST controlled by the RBNZ.


• Variable and compulsory superannuation savings scheme controlled by RBNZ.


• Government spending and immigration stance when inflation pressures are high.

“Other countries have adopted a range of these measures, so New Zealand does not have to break new ground or put its exporters at risk where others have not”, says Mr. Walley.

“Our trading partners are enjoying growth in their tradable sectors and their overall economies which is leaving New Zealand behind. Unless policy settings deliver one economy, our companies in the tradable sector will struggle to maintain their market share and margins. They will continue to downgrade their New Zealand operations and relocate offshore and we can all give up hope of being part of a first world economy as our exports become increasingly simply”

The OutLook concludes that asset price driven inflation is the most critical threat to the life of New Zealand’s export sector, particularly elaborately transformed products.

“House prices are driving domestic consumption, which in turn drives higher interest rates and a strong currency; an ongoing cycle that will continue to push more global liquidity into the country as investors and speculators chase interest rate spreads”, says Mr. Walley.

“This might be a welcome prospect for those individuals and companies with a domestic focus such as importers and retailers, yet this cycle increases the pressure on the tradable sector and if current trends continue, we can only expect exports from New Zealand to become increasingly simple and increasingly susceptible to commodity price fluctuations”.

“Recent indications are that the domestic sector might be slowing; however much of the pain felt by the export sector has been self inflicted and must we really go through it again at some point in the future? Policy that drives the two economies outcome is not smart policy”.

“This does not have to be the case; there are policies that the Government can pursue to better balance the economy and not disproportionately impact our manufacturers and exporters. Having identified these possible measures, the next question is whether there is the political will and leadership to implement them”.

The link to the full OutLook report is:
http://www.mea.org.nz/document.aspx?id=150

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ENDS

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