Uncertainty Increases Over Recovery Prospects

EMBARGOED UNTIL 1AM 26 JANUARY 2000

26 January 2000

UNCERTAINTY INCREASES OVER RECOVERY PROSPECTS

“The latest WestpacTrust business opinion survey for the December 1999 quarter shows that overall manufacturers are positive about the future, but significantly fewer firms are confident than at the beginning of the year”, said David Moloney President of the New Zealand Manufacturers Federation.

“This is despite very strong economic performance during the December quarter with strong sales and profitability figures, and the best productivity figures since 1994, and is the third quarter in which business confidence has declined from a peak in the March 99 quarter.”

“This lack of confidence is reflected in anticipated investment levels with only a net 5% of larger manufacturers planning to increase plant and machinery investment over the next 12 months. Only a net 28% of exporters expect export sales to increase compared with a net 45% of exporters in the June 1999 Quarter.

“Manufacturers concern appears driven by unease over recent Reserve Bank actions and the predictions of forecasters that these will result in an appreciation in the currency at a time when manufacturers are already struggling to remain competitive at the current exchange rate. This is coupled with anticipated increases in cost pressures due to proposed changes to ACC and the Employment Contracts Act.

“The strong actual performance has been due to the impact of the fall in the exchange rate during the quarter. A movement upwards in the exchange rate can only be to the detriment of the still fragile recovery in the productive sector.”

A copy of this media release and the survey can be found on ManFed’s web-site www.manufacturers.org.nz

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