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7
NOV 12

Letter from Wanganui Exporter




I recently had this email from an exporter in Wanganui.

Dear John,

Thanks and regards for your efforts to get traction with the Government over trade.

I watched Q&A this last weekend and was amazed to see politicians actually discussing the plight of manufacturing exporters.  I could only imagine their salaries had arrived a day late in their bank accounts or some other earth shattering event to disturb their world view.

Major concerns among the construction, development and service companies involve the poor performance of the Wanganui District Council.  They have fallen prey to engineering consultants who are rapacious beyond the dreams of avarice.  Decisions and consents are always slow, often wrong and always expensive.

The damage this does to the movers and shakers locally can only be guessed at as some just fold their tents and walk away.

At a recent BNZ function, the branch manager talked to me about their new house just framed up and asked my opinion on the future value of the US Dollar after the US elections.  After suitable qualifying remarks I said I thought it would continue to weaken against our NZ Dollar.

Oh goody she said, next year we want to pick up a nice 4-5 year old Mustang (Ford) in the States and bring it home! I was certainly pleased for her quiet accumulation of US currency at around 83 cents for her NZ Dollar.

I did ponder the fact that nearly ten years of effort and planning was, for me, out the window because of the high value of our NZ Dollar.

It is not the money so much as our competitive edge in world markets. We are now selling on functional quality and not price.  A quick look at relativities led me back to our core supply contract; strike price some years ago was US$0.68 to our dollar.

At that time we could export and receive NZ$147.00 for every US$100.00 in export sales.  This week that US$100.00 in export sales brings in NZ$120.00.  For every drop of 1c of NZ$ exchange rate we bank 2c in export returns. 

This of course is a crude snap-shot but serves to illustrate the problem.

We would like the beehive to stick to rational policy settings and just get out of the way.  This is not an easy sell to people who are looking for ever finer slicing of the fiscal pie rather than baking more pies.

We can expect a lot more people yet to just fold their tent and go away.

---------------

Thanks for your email,

It is all too true that where banks and domestic economy people see cheap imports, exporters see vanishing margins – the current account deficit inflates as property pumps our collective debt.  The winners in the domestic economy (like your bank manager) see no end in sight and the ones paying the bill see margins ruined to the point of business failure or tents packed exit to elsewhere.

As to Q&A the alignment has not come without a significant amount of work from a number of people, we have been working hard on everyone for what seems like forever.  It turns out the nominal left are listening – the nominal right are simply too fixed in their views to see the writing on the wall.

Since we persuaded Labour to resile from the consensus on monetary policy in late 2009 they and the others have seen the folly of the unconstrained race to the bottom and the need for export friendly action for policy makers.  The hands off approach might be simple and attractive but too few, if any in the world put that theory into practice, more so since the start of the global financial crisis.

You might have noticed a number of my text comments on Sunday, people are getting better at articulating the message and David Parker in particular gets it.

I am / we are talking to any group that will listen on the feel good folly of an overvalued exchange rate, a banking system incentivised to borrow offshore, and a tax system that supports speculation over production and even well-heeled audiences see the sense in the message.

As a nation we have to address deeper questions: What is important to us?  What really matters to us?  What will be die in the ditch for?  The intervention by the Swiss National Bank a year or so ago to put a ceiling on the rise of the Swiss Franc against the Euro and to die in a ditch to enforce it is an example.  In a neutral, hands off world an action to value jobs in the Swiss export sector above cheaper imports for everyone in Switzerland would not be possible; in a hands-off world there is no intellectual framework to make such a trade-off.

The Swiss have decided what is important to them, they clearly have their die in a ditch issues.

Sadly at this point New Zealand does not.

John



 




 


tags: exporter, jobs, exporter, currency
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