“Wait and See” for Sth Island economic recovery
13 July 2006
“Wait and See” for South Island economic recovery.
The Canterbury Manufacturers’ Association says that the Mainland Monitor report released this week shows encouraging signs for the South Island economy and agrees that it is a case of ‘wait and see’ before the manufacturing and productive sectors are able to provide significant economic growth for the region.
The CMA says that while the decline in the consumer spending will not be welcomed by retailers and importers, the indication that the local economy is not relying on consumption for its momentum is a step in the right direction.
“Spending has become a significant problem for the New Zealand economy as a whole, not just for Canterbury and the South Island” says CEO John Walley. “Consumers have an important role to play in the regional and national economies and many people rely upon the consumer for jobs and business growth. However, consumer spending cannot be the basis upon which real economic growth is built, particularly when there is a large element of debt associated with it. The productive and exporting sectors are the key drivers for sustainable economic growth. Growth based on debt enabled consumer spending is an illusion”.
Mr. Walley agrees that it will take time before business confidence rises, especially given the impact the high dollar and rising volume of imports has had on local firms with a growing number either scaling back their operations, relocating production offshore or finally giving up and closing the doors for good.
“The question is whether those manufacturers’ and exporters who made it through the hard times are able and willing to try and take advantage of the weakening Kiwi dollar” says Mr. Walley. “For many companies the issue of contraction is structural and not cyclic. Therefore the levels and speed of recovery varies between firms and some will see growth long before others, depending upon the strength of their markets, their relationships with offshore partners or perhaps the most critical reason of all, their will to take on the risk of exports yet again.”
“Nevertheless, there is some early cautious optimism being expressed within the manufacturing sector but the economy as a whole will have to remain patient before there are tangible results”.