There has been a long-running debate in New Zealand and around the world about the “hollowing out” of manufacturing – ultimately this is a subset of the wider concern about tradable vs non-tradable economic activity in NZ. Also as we have said, it may be possible that what we are seeing is scarcity easing in manufacturing – a situation where we would expect productivity rise, and potentially employment fall.
With this in mind the RBNZ undertook research to figure out in what ways manufacturing output has changed post-crisis. This can be found here.
By the way, I love the title “building a picture of New Zealand manufacturing”. It captures the descriptive essence of economics
Now, what comes out of this research?
- Employment fell during the GFC, and hasn’t recovered.
- Productivity has risen
- Exporting sectors have done well, due to their exposure to Australia. The low NZ$ to Aussie and a strong Aussie market for plant and machinery (think fridges as much as capital equipment ) have helped out even as global demand has been weak.
- Import competiting sectors have been hit – as imported capital equipment, and imported consumer goods, have been cheap. This is a story of the high dollar, and potentially “overcapacity” overseas.
- Construction, and the related drop in domestic demand for manufactured goods (think furniture and hardware as well – a retail area that has been gutted), has had a major impact.
- Although manufacturing is currently close to where we would expect given construction – during the deepest parts of the crisis it was worse.
These trends are important to note. It is construction exposed industries that have struggled the most – not firms looking to export (although this is definitely not to suggest that there have been difficulties for exporters – after all, this is a massive global slowdown). Painting it this way shows that the “solution” to any perceived “problem” is unlikely to be as clear as some people writing articles are keen to suggest