Canterbury rebuild will rouse sleeping manufacturing sector, Wheeler says

Wednesday 28th November 2012

The $30 billion rebuild of New Zealand's second-biggest city should help revive a lagging domestic manufacturing sector, which is typically linked to the construction industry, according to Reserve Bank governor Graeme Wheeler.

New Zealand's manufacturing output is about 9 percent lower than before the global financial crisis, much of which has come from tepid investment in construction which has sapped the domestic side of the sector, Wheeler told Parliament's finance and expenditure committee in Wellington. That should get a kickstart as the Canterbury rebuild comes underway, which will foster investment intentions in the construction sector.

"The reconstruction of Canterbury, the investment likely to take place is more than $30 billion and spread out over several years of course, but one would expect that would be a very positive affect for manufacturing," Wheeler said.

"The main output effects for the manufacturing sector have been on the domestic sector - a lot of it has been linked to the significant decline in investment taking place, particularly residential investment in recent years," he said.

New Zealand's manufacturing activity expanded last month, having spent the five previous months shrinking, according to the BNZ-Business New Zealand performance of manufacturing index. The sector has been hit a number of high-profile job losses, the latest being Carter Holt Harvey's decision to lay off 70 staff at its Rotorua and Tokoroa plants.

That's sparked Opposition political parties to launch a parliamentary inquiry into the sector's woes outside the usual select committee process, which will be chaired by Manufacturers and Exporters Association past-president Cameron Moore.

"Any sort of ongoing decline of any sector is a concern. You would want to really analyse it carefully and see what lies behind it and whether there are policy judgements that need to be rethought," Wheeler said.

New Zealand's strong currency, which recently traded at 82.02 US cents, has been cited by manufacturers as the major reason for job losses.

Wheeler said manufacturers have been affected by the strong currency in the past three years, but "you've still seen exports grow in volume terms of the order of about 3 percent per annum."

Wheeler was appearing in front of committee for the Reserve Bank's annual report, and will face politicians next week for his monetary policy statement.

BusinessDesk.co.nz

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