KEY POINTS:
Listen up New Zealand manufacturers, there's some good news and some bad news.
The good news is you're going to become less vulnerable to the see-sawing New Zealand dollar, smarter, more valuable and more innovative.
The bad news is, well, you won't all be here in five or
10 years' time.
To some businesses, the Government's Export Year seems a nonsense with the New Zealand dollar chomping into margins as it roars towards post-float highs, forcing them to locate manufacturing overseas and cut staff.
Having cut costs to the bone, they feel somewhat bitter about comments that they should, or could, learn to better handle a high exchange rate.
But Export Year, part of the Government's confidence and supply agreement with New Zealand First, is needed precisely because of the pain some companies are going through, Economic Development Minister Trevor Mallard says.
"I think if we sit back and hope that the dollar will go down and all our problems will go away, then all that happens is that the next time the dollar goes up we're in a worse position," Mallard said.
Because of New Zealand's high interest rates compared with the rest of the developed world, the NZ dollar is attracting investors chasing its high returns, and is also riding the coat-tails of the strong Australian dollar.
Having crested above US74c this week, the kiwi is close to its peak of US74.57c since the currency was floated in 1985.
Analysts believe US75c is possible.
Retail figures last week showing spending in February at its highest level in three years had economists predicting at least one if not two rate rises that will put further upward pressure on the kiwi.
Unless the Government scraps the free-floating exchange rate, overseas investors are free to splash around.
The Reserve Bank has been casting about for more ways of raising or lowering its benchmark rate, which it uses to help pump up or deflate inflationary pressures.
The bank has a billion dollars to intervene in the market, but traders said it would be eaten alive if it tried to protect levels in the currency.
With such a high currency, manufactured and services exports have seen little growth in the last year although the latest Performance of Manufacturing Index showed the strongest growth, albeit from a low base, in 10 months.
In fact, without dairy exports, remaining exports fell 0.3 per cent in the year to December and are likely to remain weak.
The objective of the government grants, discussion forums and trade delegations is to increase the number, spread and scale of exporters, the majority of whose exports total less than $50,000 a year.
One company - Fonterra - accounts for around 20 per cent of total exports, and only 17 per cent of businesses are exporting.
What does it matter to the country at large whether a business owner exports at all, or settles for a boat, bach and BMW and no headaches about filling orders for overseas customers or finding foreign markets?
"Wouldn't it be neat if, in five years' time, Fonterra was worth twice as much to New Zealand as it is now, and there were three or four other companies that were worth half of what Fonterra was?" Mallard said.
"And if we could get into that sort of position over a five- to 10-year period, I think we've then secured the future of the country."
The hope is that a new take on exporting - not just shipping physical goods, but also services or design, for example - will lift wages and skill levels.
Among recent victims is plastic goods manufacturer Click Clack, which blames the high currency for its decision to close one of its plants with the loss of 70 jobs and shift some production to cheaper climes.
Click Clack exports 85 per cent of its production to more than 60 countries, and despite the job cuts has received union backing for its commitment to New Zealand workers.
But this is exactly the sort of manufacturer that could fall by the wayside.
"There is a bit of harsh reality there," Mallard said.
"Every time our exchange rate has gone up there has been what might have been described as a shakedown, and that's really hard."
The country can't compete "in a race to the bottom" with cheap labour in China and India, or with China's large capital investment in world-class production capacity.
"I think it's unlikely that we're going to be involved in long-run, mass production of cheap goods ... We're much more likely to be involved in niche products, much more likely to be involved in things which are close to intellectual property development in New Zealand," he said.
"So if we're doing the research, we're doing the development, we're doing the new stuff, then we're likely to build the prototypes, do the short runs, and then often the bigger runs will be offshore."
Mallard - also Minister of State Owned Enterprises - applauds the decision by Meridian-owned WhisperGen to move manufacturing overseas, another decision partly prompted by the exchange rate and resulting in job losses.
The engineering company will still make its marine generator in Christchurch, but plans to move other manufacturing to Europe where prospects are good for its home heating and hot water units.
"There's no economic justification for bringing all the raw materials to New Zealand to make it up here and to export it back to Europe or the United States," Mallard said.
"The extra transport costs, the setup costs ... are just too high and the economics don't work.
"But it can work brilliantly if it's manufactured either in Europe or very close."
- NZPA
