'Rough patch' a challenge says PM

The deteriorating economy will loom large at the first Cabinet meeting of the year today following the loss of more than 340 jobs around the country this week.

Prime Minister Helen Clark set the tone this week saying the greatest challenge facing the Government was managing the country through a "rough patch" in the economic cycle.

That rough patch made itself apparent yesterday when Rotorua wood products manufacturer Panahome cut 112 jobs and Christchurch sheepskin product manufacturer G L Bowron confirmed it will cut 75 jobs by the end of the month.

Specialty plastics manufacturer Click Clack yesterday announced it has moved $4 million worth of supplier contracts to Asia to preserve the jobs of its 300 staff, due to which the jobs of up to 35 previous suppliers of Click Clack would be lost.

Those redundancies come after South Auckland beef jerky maker Jack Links laid off 102 staff on Monday and the Christchurch company Renaissance Furniture closed at the cost of 20 jobs.

Both National's finance spokesman John Key and Act leader Rodney Hide predicted there would be more job losses as the economy slumps.

"Worse is to come as the economy tanks," Mr Key said. "No amount of further hiring in the already bloated state sector will mop up the torrent of job losses that are to come."

Mr Hide said he believed it would get worse before it got better.

"I think that New Zealand is in for a tough time this year and I think it is going to be much harder than the experts expect."

And the Greens demanded the Government act fast to prevent an "unemployment crisis" in the manufacturing sector.

Industrial Relations spokeswoman Sue Bradford said the Government needed to lower the dollar and rethink its stance on free trade.

Finance Minister Michael Cullen said the high dollar was the "unfortunate" consequence of six years of strong economic growth.

"The Government is also working hard to help businesses improve their competitiveness. Budget 2005's business tax changes and the current review of other tax issues underline our efforts to create a pro-business environment."

The high dollar has been blamed for the redundancies, with companies saying they are unable to compete globally.

Most exporters use currency hedging - contracts to sell the dollar at a set rate in the future - to reduce their foreign exchange risk, but there are signs that some hedge contracts are running out while the dollar stays high.

One currency dealer, who asked not to be named, said it appeared that many contracts expired late last year and this was probably responsible for the recent collapse of business confidence.

Employers and Manufacturers Association chief executive Alasdair Thompson said the job losses were no surprise in the current economic climate and believed more businesses would shed staff or close down throughout the year.

The association was aware many exporters were now operating at next to no margin or even at a loss as a result of pressures from the dollar.

Click Clack chief executive John Heng said the company had moved contracts overseas as it could not wait any longer for the dollar to cool and for interest rates to drop.

"The savings we achieve by moving these contracts offshore mean we can protect Click Clack workers' jobs for a while longer. We simply cannot go on forever with a New Zealand dollar that is so ridiculously over-valued."

Manufacturing and Construction Workers Union's general secretary Graeme Clarke said the dollar was forcing many others to follow in Click Clack's wake.

"The longer this trend continues the harder it will be for new, innovative manufacturing companies to establish themselves and to grow in the way that Click Clack has been able to do."

Katikati-based dartboard maker and exporter Puma Darts lost its second-largest customer from Holland to the UK late last year where boards cost 20 per cent less.