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Sustainablility Is The Key

“The Manufacturers Federation is heartened by the strength of the manufacturing sector’s growth over the December quarter. Particularly welcome is the 81% growth in net profit which raises overall profit levels to the highest ever recorded since the survey began in 1990”’ said Simon Carlaw. Mr Carlaw was commenting on the latest Economic Survey of Manufacturing released by Statistics New Zealand last Friday.

“Other pleasing results include an 11% growth in overall sales and a 4.4% growth in salary and wage payments. Growth has been strongest in the commodity processing sectors, eg 34% growth in sales from saw milling, 25% growth in sales in textiles which includes wool and carpets, and a 26% growth in basic metals, mainly aluminium and gold. This growth in sales mainly reflects increased overseas prices for these goods and the benefits of the lower exchange rate.

“It is, however, these very same factors which give rise to concerns about the sustainability of this level of growth in the medium to long term. To ensure a more sustainable recovery over the next 2 to three years, we also need to see greater investment by manufacturers in expanding and upgrading capacity. Investment is still down 4% for the quarter and 8% for the 1999 calendar year.

“Manufacturers have been discouraged by the prospect of tightening monetary conditions and uncertainty over some new Government policies.

“What will drive export growth is increased employment. This will not occur while manufacturers remain unwilling to reinvest in the sector. Current growth is the result of a international price change in commodity products rather than positive changes in the business environment in which manufacturers operate. Employment (measured by hours worked) in the sector over the period in question grew by only 2% while sales grew by 11%.

“These are all factors we trust the Reserve Bank will have factored into the anticipated interest rate rises tomorrow and the path for monetary policy over the next twelve months.”

Further comments: Simon Carlaw 04 473-3000 (bus)

04 476-7729 (pvt)

Peter Crawford 04 496 2813

04 389 8945


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