KEY POINTS:
Leading New Zealand manufacturers say they may follow Fisher & Paykel Appliances' lead and seek cheap labour overseas to maximise profits as economic conditions worsen for them.
The revelation comes as the Government strongly defended its economic record from critics who say it could do more to help exporters hit by the high New Zealand dollar and struggling to maintain jobs for their 235,000 employees.
Last night, rubber products company Skellerup said it could not rule out sending more business overseas.
Skellerup cut 25 New Zealand jobs four years ago to boost its plant in China, where 130 staff produce the classic Kiwi gumboot.
The company has 250 workers in New Zealand.
Fisher & Paykel Healthcare would not rule out the possibility of going overseas.
Chief executive Michael Daniell said the rising dollar was affecting the company's profits.
"We don't believe we are at tipping point, but it's easy to see how many manufacturers could be," he said.
Bed-maker Sleepyhead said it might go overseas, and urged the Government to adopt policies that would help manufacturers to be internationally competitive.
Economic Development Minister Trevor Mallard yesterday said Fisher & Paykel Appliances' decision to send its washing machine manufacturing to Thailand was "painful", but not an enormous surprise.
Talk of more job losses did not mean it was time to panic, he said.
"A lot of the fundamentals in the economy are in pretty good shape," Mr Mallard said.
"Clearly unemployment is going well, our research base is as good as it's ever been and improving [and] the Government fiscal situation is much better than it's been over a sustained period probably back into the 1960s."
If there was a saving grace to the layoffs, it was probably that they came at a time when unemployment was at record low levels and other businesses were crying out for workers, Mr Mallard said.
The Government has come under fire from some quarters as the high dollar makes exporters' goods more expensive for overseas buyers.
At the centre of criticism of the Beehive is the Reserve Bank's monetary policy and the way rising interest rates have fuelled the dollar's rise.
Reserve Bank Governor Alan Bollard says an increase in Government spending is one of his reasons for lifting interest rates.
National Party finance spokesman Bill English yesterday accused Finance Minister Michael Cullen of not heeding the Reserve Bank's message and of contributing to exporters' pain.
"The one thing that would make a difference at the moment is the Government hauling back its spending plan," Mr English said.
Manufacturers had shown incredible resilience over the past 15 years in adapting to no protection at all, he said, and the sector's requirements were basic.
"Not too much red tape, flexible labour law, and the widening of infrastructure bottlenecks."
But, he said, some aspects of the layoffs at Fisher & Paykel Appliances were nothing to do with the Government.
Wellington could not control the fact that low-cost labour was available in other countries and that some Asian nations now had highly sophisticated manufacturing.
Prime Minister Helen Clark yesterday dismissed suggestions her Government's spending was the reason for the dollar's rise in value, and challenged critics to say where spending should be cut.
"No one wants a super cut, no one wants education cut, no one wants health cut, no one wants the money we're spending on public transport and roading cut," she said on Radio New Zealand.
Exporters will get some relief in next month's Budget.
The 33 per cent company tax rate is likely to be cut to 30 per cent, and the $1 billion business tax plan to be announced is also expected to include tax credits for research and development.
It also appears possible Parliament's various economic minds may agree to meet and discuss changes to monetary policy.
United Future MP Gordon Copeland has called for a cross-party discussion on the issue, and several other parties are keen to talk about what additional tools the Reserve Bank could be given to combat inflation.
