Fisher & Paykel is a victim says PEC

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Fisher & Paykel is a victim says PEC

The PEC today came out in support of beleaguered Fisher and Paykel saying the company is yet another victim of the exposure to exchange rate fluctuation all exporters have endured since the current Monetary Policy was implemented.

“With a previously unlimited money supply fuelling property inflation and our monetary policy driving up interest rates and exchange rates, all non-primary exporters are forced to ask why they stay in New Zealand”, says PEC spokesman Selwyn Pellett.

“F&Ps decision making has been no different from that of most of our larger non-primary exporters. The combination of the tyranny of exchange rate volatility and the small size of the economy means companies have to try and align their income and expenditure into more stable currencies and closer to their chosen markets,” says Pellett.

“Successive governments have failed to understand that the biggest commercial risk to New Zealand exporters is run away property inflation and the poor controls we have in place to deal with it. The value of property never changes only its price. All we are doing with property speculation is pushing the price of an asset - that works just as well at $100K as it does at $500K - out of the reach of our children and increasing our national debt at the expense of the productive economy,” says Pellett.

“Say you have a world leading product and you have the entire world to choose from as your commercial base. Why would you choose a country that has interest and exchange rates tied to monetary policy, in an economy so small that the value of the currency can be and is manipulated? Our dollar was traded 118 times our GDP in 2007 compared with 65 times for Australia and that tells you we are being played,” says Pellett.

“Anyone who has sat on the board of medium sized export company knows the risks they face every time they make an investment decision. This time F&P picked the currency movement wrong and it was always a 50/50 call. If the dollar had stayed at .80 cents and the US market had stayed intact then the shareholders would be very happy with the decision. The problem is that the exchange rate is just too big a variable for most companies to contemplate long term investments, so they continually under invest in productivity and progressively become less competitive as a result,” says Pellett.

“We don’t need the Government investing in F&P or any other specific company, as this does not address the key issue, namely that we have not created an economy in which the private sector finds investing in export business an attractive proposition. If the government is to spend money it should be on measures that will encourage companies to increase innovation, improve productivity and become more, not less competitive on the international stage. When the private sector actively wants to put its money into export businesses, rather than property speculation, then we will have truly created a productive economy”, says Pellett.

The PEC believes that if we are to have an export-lead recovery then the country needs to understand what will get exporters reinvesting in their own future. Until the volatility of business interest rates and exchange rates are addressed no one will invest further in this current environment. We need to address the root cause and that remains property speculation, the subsequent inflation and our Monetary Policy.

“The world has changed and we had better adapt fast -- old behaviour will not serve New Zealand well. We think it would be a tragedy to see F&P fail but it will be a bigger tragedy if we don’t sort out the conditions that led to this crisis,” says Pellett.

About the PEC The Productive Economy Council represents a growing community of people that wish to see New Zealand return to the upper end of the OECD in terms of GDP per capita. It was founded by four of the former Trustees of the Hi Growth Project including current President of the Hi Tech Association Wayne Norrie, former executive of the Hi Growth Project, Garth Biggs, Former Chairman of the Hi Tech Association and entrepreneur Selwyn Pellett and APEC Business Advisory Council, Co-chair Technology & Information Working Group, John Blackham.

ENDS

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