RT @JoshBBornstein: 65 year study confirms my research: Tax cuts don't lead to economic growth. Ping @Nick_Xenophon , @BCAcomau https://t.…
19/08/2017 9:13 PM
RT @attn: .@Schwarzenegger has a blunt message for Nazis. https://t.co/HAbnejahtl
18/08/2017 9:38 PM
RT @PositiveMoneyUK: Make Monetary Policy Fair: It's time to explore alternatives to 'conventional' QE. https://t.co/m6CFVojm7w #QEforPeopl…
18/08/2017 9:35 PM
@deirdrekent To be expected when income is taxed and capital gain not...
16/08/2017 9:22 PM
@bernardchickey @YourHomeLoanNZ Add ring fencing loses / deal to negative gearing and we might see some balance develop in the economy.
16/08/2017 7:36 PM
@bernardchickey Or take the job and do the right thing anyway - the RBNZ is "independent" after all...
16/08/2017 7:34 PM
@bernardchickey Not take the job because you would know you would be on a hiding to nothing. The link between earn… https://t.co/nxPRuAaT6t
16/08/2017 7:31 PM
RT @theyearofelan: Sure, the cancer was aggressive. But the chemotherapy was also very aggressive. There was aggression on both sides
16/08/2017 7:27 PM
@bernardchickey DTI+LVR+OCR all needed for financial stability & inflation.RBNZ can then push back on dumb policy f… https://t.co/CqXISZUHGq
16/08/2017 7:27 PM
@SelwynPellett Farming capital gains makes it hard to pay current expenses hence the need to externalise costs. Th… https://t.co/J1yevZAHft
14/08/2017 5:46 PM
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APR 12

Government needs theory of constraints training

Statistics New Zealand’s Business Operations Survey was released recently and one of the areas covered was the barriers to generating overseas income. Predictably the exchange rate was the biggest barrier for firms already exporting. In fact, if we look at the table below, the exchange rate is the first, second and third biggest barriers (low demand and increased competition offshore is generally due to price pressures generated by an uncompetitive exchange rate).

The problem is our Government is focused on the smaller constraints and ignores the larger ones. There is significant Government activity around negotiating free trade deals, which seek to deal with access and tariffs in overseas markets, but this is low on the list of barriers. New Zealand Trade and Enterprise provide some help in the middle area by giving some access to finance and some exporting expertise. This leaves the top three constraints completely untouched.

Essentially there are Government interventions to deal with the smaller constraints but no political will to deal with the major issues. The fact that only 18 percent of businesses actually export, according to Statistics New Zealand, underlies this attitude.

The distance from markets is an unavoidable physical constraint for New Zealand exporters – that leaves only the top three exchange rate competitiveness issues. Distance will always be a problem and even the internet offers no salvation; software companies based in New Zealand struggle to compete in offshore markets. Make no mistake uncompetitive exchange rates mean a low wage future for New Zealand.

Around the world we see quantitative easing in the United States and United Kingdom, direct intervention in Switzerland in Singapore, and capital controls in Brazil. We must address this competitive element. If competitors seek to improve the competitiveness of their currencies we must respond to provide a level playing field.

John Key has mentioned that the Government is “considering what we can do to resist a rising exchange rate”. Any such action will be welcome among exporters and it is clear from Statistics New Zealand’s research that it is long overdue.

tags: theory of constraints, exchange rate, export barriers
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