Tasman Makos: News

RWC Could kick start recovery
28-Jun-2010

PETER WATSON - Nelson Mail
Trading will remain tough for the rest of the year for many Nelson exporters and most retailers, but the 2011 Rugby World Cup will help kick-start the recovery, predicts leading local businessman John Palmer.

In a sobering address yesterday to more than 100 people at an economic summit organised by the Nelson Regional Economic Development Agency, Mr Palmer said he didn't see economic conditions improving until next year when the Rugby World Cup would provide a "huge boost" to the economy.

Meanwhile, almost all retailers he spoke to believed the recession wasn't over and that this winter would be tougher than last year, while exporters were only marginally more optimistic as they battled a high kiwi dollar, tightening credit from banks and weak European markets, the chairman of Air New Zealand and Solid Energy said.

Apart from a few bright spots such as forestry and individual companies like NZ King Salmon, most local major industries were finding it difficult, he said.

The horticultural sector remained in the doldrums because the rising New Zealand dollar was wiping out the gains from even the better performing markets and the prospects over the next few months were not bright. "If you are expecting the exchange rate to go back towards 60 cents against the US dollar, I suggest you rewrite your budgets."

The recovery in Europe, where he had recently been in his role as a director of Rabobank, was going to be slow and could yet falter if the problems of debt-plagued countries like Greece, Portugal, Spain and Ireland got worse, he said. There was also prospect of growing political instability and division in Europe which could cause further harm.

There were more positive signs in the United States for exporters but it had yet to tackle its "mountain of debt".

Asia, and in particular China, offered the best prospects, where "the mood could hardly be more different".

He had just returned from conducting Solid Energy business in China and coal customers there were eager to do business.

"Their message to us was how much more coal can you give more quickly and what investment opportunities do you have for us that we can partake in because we could be ready to start tomorrow." Even if the Chinese economy slowed, it was such a big and increasingly wealthy market that it still "very promising" for New Zealand businesses, he said.

However, tightening credit from banks and balance sheets burned by the recession were likely to hamstring companies trying to expand.

"Over the next year or so access to credit going to be a major constraint on economic growth."

In the longer term, "sunshine and scenery won't be enough" for Nelson to prosper and he warned the region faced "economic stagnation" if it didn't form a coherent view about how it should develop.

Key sectors such as horticulture weren't going to be the wealth generators that they had traditionally been and there needed to be a change in the local environment which "almost discouraged" new businesses, he said.

"Growing businesses is essential to the future economic health of the region rather than saying they are there just to be taxed and levied in order to support somebody else's lifestyle."

Business and Economic Research Ltd senior economist Ganesh Nana had a similar message, telling the conference the recovery had been over-hyped and was very narrowly based on big rises in forestry, dairy and oil and coal, with most other export industries struggling.

New Zealand risked ending up as a high-volume, low-cost exporter, even for industries such as wine and tourism. "There are still hard yards ahead for the New Zealand economy."

There were 40,000 more people without jobs than in March last year and there had been no growth in the total number of people employed in the primary, processing and manufacturing industries over the last decade, despite 400,000 jobs being created.

New Zealand had spent the last 50 years spending more than it earnt with total debt now equivalent to 90 per cent of annual income and forecast to get worse. The only way out of that hole was to put exporting centre stage, he said.