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Election Uncertainy Hinders Manufacturing Recovery

7 October 1999

ELECTION UNCERTAINY HINDERS MANUFACTURING RECOVERY

“Concern about the possible outcome of the elections, as well as anticipated action on the part of the Reserve Bank to tighten monetary policy, seem to be dampening the manufacturing sector’s recovery”, says David Moloney, President of the New Zealand Manufacturers Federation. Mr Moloney was commenting on the release of the WestpacTrust Analysis of Manufacturing for the June quarter.

“Based on March quarter figures, ManFed had been fairly confident the recovery underway in the manufacturing sector would strengthen as the year progressed. There have been some good signs; profits are up again and ETM exports continue to strengthen. But profit has been used to retire debt, rather than for reinvestment, and hours worked have continued to slide.

“One of the major factors contributing to the weak recovery is uncertainty over what may ensue after the elections and whether there is likely to be a Government prepared to take the steps necessary to foster economic growth.

Perceived lack of action over tax reform, a commitment by more than one of the
main political parties to turn the clock back on industrial relations and the ACC reforms, do not hold out the promise of an environment supportive of manufacturing.

“The other area of uncertainty relates to monetary policy and predictions that the Reserve Bank will move to tighten it before the end of the year.

“Despite the weakness of the recovery to date, the overall outlook for the sector is still reasonably bright with growth expected to pick up through the latter part of this year and into the next. A lot will, however, depend on the outcome of the elections and what the Reserve Bank decides to do.”
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