Some people who don’t really understand economics think it’s all about confidence – if business would be more confident, they would then invest more and hire more people. In truth, confidence is merely an indicator that the fundamentals for growth are right. So, when Joyce accuses manufacturing bosses of ‘talking down’ the economy, he’s missing the point. Probably intentionally.
The manufacturing bosses and the EPMU at the first day’s hearing of the Manufacturing Inquiry were unequivocal – the over-valued dollar is killing us. And it’s simple to see why – sell $100 of product overseas in US dollars in 2001 and you got NZ$250. Today, you get $127.
You can innovative your arse off, but against that kind of declining return, you’ll be lucky to tread water.
And, in the last four years, manufacturing stopped treading water. Nearly 1 in 5 manufacturing jobs have been lost during that period.
It’s time to move the debate past ‘is there a problem with manufacturing’ and ‘is the high dollar that problem’? The answer to both is clearly ‘yes’.
Now, the question is ‘what do we do about it?’ The logical option would be to do what all our trade partners are doing to lower their currencies: capital controls, export assistance, quantitative easing, a lower official cash rate are all options.
It’s time to stop saying ‘there’s no alternative’ and, instead, start asking which alternatives we’ll choose.