Manufacturers warn skills lack may hurt growth

By RICHARD BRADDELL

WELLINGTON - Skill shortages in maufacturing may prove to be the biggest constraint on a sector at last showing signs of recovery as the domestic economy gathers speed.

Commenting on the latest WestpacTrust analysis of manufacturing, the president of the Manufacturers Federation, David Moloney, said that in spite of a drop in employment as a whole, skill shortages had already become a problem and that could crimp growth in the medium to long-term.

Nevetheless, the WestpacTrust review reported that the outlook for manufacturing was better than for some time with improved labour productivity and higher profitability.

Manufacturing sales in the September quarter were up 6.1 per cent on the same quarter of 1998, the largest real increase since March 1995.

But while a 9.4 per cent rise in domestic sales underpinned the recovery, export sales were down 1.4 per cent, largely due to a 25.5 per cent dive in exports of petroleum, coal, chemicals and associated products.

On an annual basis, the picture for manufactured exports looks better with growth, excluding primary products, coming in at 12.2 per cent to $11.1 billion - just short of half total exports for the September year.

While heavy industry and forest-based sectors drove growth, with rises in excess of 12 per cent each, general manufacturing exports slipped 1 per cent on the previous September year.

Nevertheless, exports of elaborately transformed manufactured goods were up 3.8 per cent while exports of metal products jumped 20.2 per cent to $2.1 billion.

While the Asian recovery and the lowest effective exchange rate since 1993 underpinned exports, the probable recovery in the New Zealand dollar, skill shortages and likely wages pressures may dampen future performance.

Noting that labour productivity had jumped 9.3 per cent on the September quarter of 1998, the survey said that was at least in part due to falling output in labour intensive areas such as clothing and footwear and strong growth in the capital intensive wood processing sector.

"The near-term outlook for profits is positive with a growing local economy and export prospects remaining good," the survey said.