Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Short solutions are not the answer to Stagflation

Canterbury Manufacturers’ Association
Media Release
20 June 2006

Short solutions are not the answer to ‘Stagflation’.

The Canterbury Manufacturers’ Association is warning that stagflation in the New Zealand economy will have serious repercussions particularly for small and medium sized enterprises committed to funding research and development programmes.

The costs to New Zealand companies have already risen sharply this year due to the increase in petrol costs, the falling dollar and the increased competition from imported goods and while some returns from export markets are improving developing those markets has a major cost. Caught between the rock of cost increases and the hard place of falling demand, business development, particularly exports, will slow or stop. The inevitable consequence is an expanding trade deficit bubble that will burst sooner or later.

The Association fears that if New Zealand is confronted with a growing current account deficit and stagflation, the Government will resort to short-term contractionary fiscal policies whereby it cuts spending, increases taxation and interest rates in an effort to reduce inflation. However, the CMA says that Government should focus on value driving policies that support exports from a solid elaborately transformed manufacturing (ETMs) sector as an alternate course of action. This would involve Government implementing a policy framework that at least encourages research and development, more investment on productive plant, and early stage investments in ETMs. Firm action on external price stability might also encourage more to risk the development of export markets.

The CMA has already spoken out on the wisdom, or lack of it, of large wage increases and the potential for tax payers to be underwriting risk in SOEs competing with private investors.

According to Chief Executive John Walley, “Government policy should be focusing on supporting behaviours that will encourage value added exports. Without better balanced trade we must look to the rest of the world to fund our excess consumption and that is not a sustainable position as sooner or later our credit will run out. At that point expect some real pain.”


© Scoop Media

Business Headlines | Sci-Tech Headlines


I Sing The Highway Electric: Charge Net NZ To Connect New Zealand

BMW is turning Middle Earth electric after today announcing a substantial contribution to the charging network Charge Net NZ. This landmark partnership will enable Kiwis to drive their electric vehicles (EVs) right across New Zealand through the installation of a fast charging highway stretching from Kaitaia to Invercargill. More>>


Watch This Space: Mahia Rocket Lab Launch Site Officially Opened

Economic Development Minster Steven Joyce today opened New Zealand’s first orbital launch site, Rocket Lab Launch Complex 1, on the Mahia Peninsula on the North Island’s east coast. More>>


Marketing Rocks!
Ig Nobel Award Winners Assess The Personality Of Rocks

A Massey University marketing lecturer has received the 2016 Ig Nobel Prize for economics for a research project that asked university students to describe the “brand personalities” of three rocks. More>>


Nurofen Promotion: Reckitt Benckiser To Plead Guilty To Misleading Ads

Reckitt Benckiser (New Zealand) intends to plead guilty to charges of misleading consumers over the way it promoted a range of Nurofen products, the Commerce Commission says. More>>


Half A Billion Accounts, Including Xtra: Yahoo Confirms Huge Data Breach

The account information may have included names, email addresses, telephone numbers, dates of birth, hashed passwords (the vast majority with bcrypt) and, in some cases, encrypted or unencrypted security questions and answers. More>>


Rural Branches: Westpac To Close 19 Branches, ANZ Looks At 7

Westpac confirms it will close nineteen branches across the country; ANZ closes its Ngaruawahia branch and is consulting on plans to close six more branches; The bank workers union says many of its members are nervous about their futures and asking ... More>>

Interest Rates: RBNZ's Wheeler Keeps OCR At 2%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2 percent and said more easing will be needed to get inflation back within the target band. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news