Government does not understand exporting – 17 September

Comments from Steven Joyce over the last week demonstrate that the Government does not understand exporting say the New Zealand Manufacturers and Exporters Association (NZMEA).

NZMEA Chief Executive John Walley says, “Steven Joyce described the jobs being lost due to the high currency as ‘uneconomic’ and their sectors as ‘dying industries’. If he thinks that milk, coal mining, aluminium smelting and wood processing are all ‘dying industries’ then damn near every other exporter should be looking over their shoulder. It is time our leaders moved past the post-industrial fantasy and recognised that onshore value add is something to be prized not disparaged.”

“It is correct to say that a fall in the NZ Dollar will impact living standards in the short-term – imports, TVs, petrol and overseas holidays will be more expensive. However, exporters will earn more, help to balance our current account (stop increasing our international indebtedness), create more jobs and provide a future for New Zealand that looks past the end of this political cycle.”

“An overvalued currency might feel good for a while but cheap imports and offshore holidays don’t help sustain an economy and really don’t matter much when you don’t have a job.”

“There is a reason that the jobs are uneconomic – our policy settings overvalue our currency, and encourage consumption and investment in real estate over investment in productive industries that create growth and jobs.”

“There are a number of options available to the Government which would help to manage the exchange rate – direct intervention is one alternative. Those who claim that it is impossible demonstrate their own lack of understanding. A central bank can technically sell currency forever and build up huge foreign reserves – there is not a speculator on the planet that will stand against a central bank that means what it says when it is shorting its own currency. Switzerland’s experience is clear, unequivocal evidence of that fact.”

“As the world changes clear and open policy debate is vital. This issue is more important than personalities or playing politics. Introducing spurious nonsense such as claiming exporters want two exchange rates or attempting to substitute proper debate with pejorative references is not helpful. We need to deal with the problem not play games,” says Mr Walley.

“Increasingly policy frameworks that focus on exchange rates and inflation are being implemented around the world and are truly best practise among export dependent nations.”

“The key point is that we must balance Total Foreign Costs (including privately sourced foreign debt) and Total Foreign Earnings in order to stop the increase in Foreign Debt. Allowing our current economic settings to continue is to knowingly support the mortgaging of New Zealand with no productive asset to show for the increased debt.”

“It takes a particular sort of world view to dismiss the empirical evidence that our policy settings have failed us while others have succeeded. A new normal needs different thinking and it is hard to dismiss what the likes of the Chief Economist of the IMF Olivier Blanchard or economists Joseph Stiglitz and Jeffrey Frankel have to say.”

“The fact that can’t be escaped is that extending the status quo for as long as possible will come with a huge bill at the end.”

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