CEOs slam killer dollar

CWF Hamilton chief Keith Whiteley (left, with fellow submitter David Bennett of Pacific Helmets) yesterday told the parliamentary inquiry that the exchange rate had to become part of the policy mix. Photo / Mark Mitchell

The high dollar is killing us and hollowing out a vital part of the economy.

That was the consistent message from a string of chief executives to the first day of the parliamentary inquiry into manufacturing being run by Labour, the Greens and New Zealand First.

"People think a high dollar is good - right up to the point they lose their job," said Imarda chief executive Selwyn Pellett.

About 40,000 manufacturing jobs have been lost since 2008, said Bill Newson, the general secretary of the Engineering, Printing and Manufacturing Union.

"Last year the trend accelerated and we had two companies a week notifying us they needed to talk about redundancies," he told the MPs.

The two common denominators in what the companies told the union were the high and volatile exchange rate, and the fact that they saw no coherent strategy by the Government to support them, Newson said.

Currency hedging was of limited use, the MPs were told. Forward cover eventually ran out and it tied up capital in the meantime.

Keith Whiteley is managing director of jet boat maker CWF Hamilton. It has a 50 per cent share of the global market - its nearest rival is an arm of Rolls-Royce - and no debt.

Its policy has been to hedge 50 per cent of projected sales five years ahead and 100 per cent one year ahead, which means it currently operates with an exchange rate of US74c and €56c.

At those rates its profit is about 9 per cent of sales, Whiteley said. If it faced current spot rates (US84c and €62c) it would be a marginal 2 per cent.

"The single monetary policy goal of targeting inflation is now past its use-by date. Exchange rate considerations must become part of the mix," Whiteley said.

"We are not looking for a massive downward adjustment - US75c would allow us to remain competitive."

Pellett said the companies he had founded in 2001, Imarda and Endace, had clocked up export sales of more than $450 million.

But over the same period the kiwi had more than doubled against the US dollar. "I doubt that either Imarda or Endace would have made it through the start-up phase at current exchange rates."

John Walley of the Manufacturers and Exporters Association (MEA) said that given New Zealand's size, manufacturing on any scale required firms to export and that meant trading in someone else's currency.

The sector's contraction meant the loss of innovative talent offshore, he said. People with any get-up-and-go were doing just that.

Supporting the traded sector required a stable currency around a level capable of balancing the current account, MEA said in its submission.

It also called for a capital gains tax, reinstatement of research and development tax credits and accelerated depreciation of capital plant.

What manufacturers do not need, according to Gordon Sutherland of AW Fraser, a bronze foundry and machine shop, is fatuous advice from politicians or others to "get more efficient" or "put your prices up".

In the course of contending with the tyranny of distance and labour costs which are not low by world standards, his firm had already invested millions of dollar in lean manufacturing, he said. "Should we invest millions more? I would have to have rocks in my head."