Manufacturing in New Zealand - Mar 2016

It is clear that manufacturing sector remains vital to the economy - it is the largest economic sector in New Zealand, contributing 11% percent to the country’s GDP in 2014/15 employing about 12% of the nation’s workforce with circa 200,000 jobs putting it at the fourth largest employer. Metals product manufacturing in 2014 contributed to a little over 1% to New Zealand’s GDP.

This makes New Zealand one of the more manufacturing-heavy economies in the Organisation for Economic Co-operation and Development (OECD). This makes manufacturing more important to our economy than it is to Australia’s, and on par in relative importance with Western Europe and the United States of America. This is important, since New Zealanders do not typically think of themselves as living in a manufacturing economy.

This misperception can lead to people taking training and career paths, and entrepreneurs to making business decisions, which could undermine the potential for growth. It is not surprising that—in a recent survey conducted for Business NZ—high growth manufacturing firms emphasize skill shortages and other constraints on talent driven growth as being much more important than any effects of costs or exchange rates.

There has also been a noticeable shift away from pure manufacturing to bundling of manufacturing and services. Reported statistics then underestimate the importance of manufacturing, but also can create misunderstanding about how the sector actually works and what skills it requires.

In any case, there is strong measured interdependence between manufacturing and other sectors in the New Zealand economy, as over 17% of manufacturing output results from the use of professional services and 5% of production is outsourced to contractors.
Overall, the common factors that make successful New Zealand manufacturing competitive are: ƒ Talent-driven innovation rather than focus on cost-minimization, and the architecture of New Zealand firms which is shaped by the country’s small market.

Four common themes emerged from the survey when New Zealand manufacturers were asked to provide their views on the top public policy issues that they would raise with the Government:
• Increase in research and development (R&D) grants
• Address skills shortage
• Improve business relations in key export markets, and
• Maintain and improve stable macro-economic parameters, such as the exchange rate and the corporate tax rate.

The Government has a number of initiatives already under way to help the manufacturing sector. Alongside these existing initiatives and given the level of contribution to GDP, Metals New Zealand has joined with other industry associations in discussions that will increase the weight of voice recommending that the Government….

1) Develop an overarching Manufacturing Policy. The objective of such a policy is not to provide protection or further support, but to ensure coherence across various policy setting
2) Positively communicate that the manufacturing sector is a vibrant and integral part of the economy. This may seem like a small thing, but mis-perceptions about the nature and the future of the sector are contributing to skill and capital shortages
3) Expand existing programmes that have shown demonstrable success
4) Encourage more collaboration with research institutions and companies internationally
5) Tailor export promotion to market circumstances
6) Increase the supply of skilled workers, and
7) Continue to implement the new principles & mandatory Rules of Sourcing that will provide both the best value to all NZ and give NZ manufacturers a fighting chance against competent international suppliers as the globalization of world markets rolls on being led by Free Trade Agreements and Government Procurement (GPA) initiatives.

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