Change From Commodity Focus Required

10 April 2001

CHANGE FROM COMMODITY FOCUS REQUIRED

"The release of the NZIER Quarterly Survey of Business Opinion today shows the domestic economy is much weaker than has been indicated by financial sector analysts", said Simon Carlaw, Chief Executive of the New Zealand Manufacturers Federation.

"These analysts were confident that a strong primary commodity sector meant the New Zealand economy could grow strongly, even though the growth outlook in our trading partners has deteriorated significantly.

"Primary commodity export returns have increased strongly in nominal terms but the weak exchange rate has also meant imports, particularly oil, have cost more. Activity levels have looked good in rural areas and provincial centres, but the main metropolitan centres, which now dominate economic activity, are weak.

"The weak exchange rate means manufacturers still expect to achieve some export growth, despite the downturn in our overseas markets. However, if New Zealand is to achieve a higher level of sustained economic growth, the manufacturing sector needs a better basis for competitiveness than simply a weak exchange rate.

"The current outlook is not good, with firms' growth constrained by a lack of labour and plant capacity. Investment intentions are very weak due to the decline in the outlook for the business environment. In part at least, Parliament has yet to move on from its focus on commodities. Yesterday's dairy industry decisions, for example, will mean that manufacturers adding value to dairy products still cannot decide their own export strategies.

ENDS

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