Red Alert

Archive for the ‘Manufacturing’ Category

Kiwirail: Don’t say you weren’t warned!

Posted by on March 13th, 2013

This column (written by me) appeared in the Dunedin D Scene newspaper today

A parliamentary inquiry into manufacturing heard this week in Dunedin there are no quality checks on the manufacturing standards of the rail wagons imported from China – a contract which sounded the death knell for the Hillside workshops.

Common themes emerged at the day-long hearing with Hillside, NZ Aluminium Smelters, Oamaru’s Summit Woolspinners and the unions representing workers at those plants questioning tenders awarded to offshore companies over local providers based purely on lowest cost, rather than the true value to the whole of the economy; the impact of the high dollar on exports and indifference of government to keeping and building a skilled workforce in our communities.

One of the most chilling revelations was that there are no quality checks being undertaken on the standard of manufacture of the Chinese imported wagons.

The inquiry, initiated by Opposition parties heard that welding on both wagons and locomotives was substandard and that no checks were undertaken to ensure they met New Zealand standards.

I have since been told that a directive has been issued to Kiwirail staff that no-one is to stand on, or ride in the controversial IAB wagons imported from China in 2011. That directive does not apply to New Zealand built wagons. These wagons also have a speed restriction placed on them due to the systemic flaws with their design and construction.

The Rail, Maritime Transport Union has recently sounded a sobering warning through its latest journal that Kiwirail culture has dangerously shifted towards services over safety.

Clocks have been installed in Kiwirail workplaces and performance is being measured on minimising time delays.

The pressure from within Kiwirail to meet Government policies for profit on its freight business and to reduce cost on other parts of the organisation is a time bomb waiting to go off.

The union likens it to the period in the late 1990s when a series of fatalities stimulated a Government inquiry in rail health and safety.

Kiwirail and its political masters should be warned that the country is watching closely the impact of lowest cost tendering, cuts to rail maintenance and the pressure to put time-keeping over health and safety issues. You can’t say you haven’t been warned.

Red Alert: Deadline tomorrow to submit to the manufacturing inquiry

Posted by on November 29th, 2012

Submissions to the joint party Parliamentary Inquiry into Manufacturing close tomorrow Friday 30 November.

The inquiry has been jointly called by the Labour Party, the Green Party, New Zealand First and Mana as they seek to address the crisis in our manufacturing industry that the National Government continues to deny.

More than half of the manufacturing businesses that began in 2008 have disappeared in the past four years and the rate of new manufacturing businesses starting up has declined by a third in four years, from over 2,000 a year in 2008 to just 1,300 a year this year. Over 8,000 manufacturing businesses have closed and more than 40,000 manufacturing jobs have been lost since this government took office. Jobs and businesses shutting down or heading off shore affect whole communities and local economies.

The recent announcement of 90 redundancies at KiwiRail’s Hillside workshops is an example of this that hits close to home for myself and my constituents. Workers at Hillside have lived with their uncertain futures since the intended sale was announced in May while the announcement of 25 redundancies at the O’Brien’s Benchtops Ltd no doubt took many of those affected by surprise so close to Christmas. I have started a collection for Christmas

Further afield the reverberations of further losses such as Tiwai Point aluminium smelter and Mataura’s Meatworks are being felt through my electorate and the wider South Island. And I know we are far from the only area hit by this crisis.

The Inquiry Committee is calling for submissions and will hear from people around the country early next month but you only have until tomorrow to submit in writing and request to be heard by emailing

We want to hear the personal experiences of workers and businesspeople who have lost jobs and income in recent years, as well as anyone else who has an opinion or ideas about what the Government should be doing to support these industries in the current global economic climate.

Because some workers fear there may be reprisals for having their say or simply don’t want to be personally identified, if so you can still submit.

Send your views to before the end of this week.


What helped the UK bring back manufacturing?

Posted by on August 30th, 2012

I am travelling to the US and UK to discuss my ideas on monetary policy with some of the best economic minds in the world, including former World Bank chief economist Joseph Stiglitz, Harvard academic Jeffrey Frankel and IMF chief economist Olivier Blanchard.

Evans-Pritchard says: “Inflation targeting is dead”

“arbitrage opportunity of New Zealand well known in the UK”

Today I met with Ambrose Evans-Pritchard.  He is International Business Editor of The Daily Telegraph. He has covered world politics and economics for 30 years, in Europe, the US, and Latin America.

I have followed his writing for a number of years. For a period his by-line was ahead of the curve, and his analysis of the GFC and its consequences certainly has been.  So I was keenly looking forward to meeting with him today. I was not disappointed.

We primarily discussed the topic which my study trip concentrates on – monetary policy, and its effects on exchange rates, current account deficits, growth in the real economy and private debt.

Ambrose said the credit inflows from the carry trade caused by New Zealand’s comparatively high interest rates must be a concern. He said that in the UK the arbitrage opportunity in New Zealand was well known.

I said that, in my view, for a number of years the Reserve Bank underplayed the seriousness of this, despite the fact that those credit flows fuelled the consumption binge and asset price bubble that higher interest rates were meant to curb.

I was struck when Ambrose commented that “inflation targeting is dead”. He was interested to know why it has persisted in New Zealand. I said maybe it was because of our experience with stagflation in the 1970s and early 1980s.

Ambrose said Great Britain would be in a far worse position if it had not been able to adjust to its decline in circumstances via a drop in the pound, which has led to resurgence in manufacturing, especially in the car industry. What a boost it would be to New Zealand’s modern manufacturing industry to have a dollar unaffected by arbitrage.

We traversed my view that competitive devaluation is alive in the world. Ambrose said he does not know whether it was an objective of the USA’s quantitative easing, but a consequence has been a 12% pa narrowing of the terms of trade gap between USA and China.

Ambrose believes UK and the USA will embark upon further quantitative easing that will have flow-on effects to the New Zealand dollar. We discussed whether concentrations of wealth born of the huge trade imbalances and settings in some countries means there is a need for greater care or attention to asset price bubbles and whether the globalisation of investment flows  (as opposed to trade flows) is desirable.

We discussed the contrast between New Zealand under Clark/Cullen and the UK under Blair/Brown. Cullen ran budget surpluses, leaving low government debt and countercyclical tax cuts, whereas Brown ran deficits of 3% of GDP when he should have been running a 2% surplus.

That 5% pa of GDP stimulus, and slide in the UK government books, has left a government debt hangover for the UK reminiscent of the debt burden Muldoon left for New Zealand in 1984. I told Ambrose that it took New Zealand a generation to overcome that debt burden, and that my impression, as an outsider, is that the likely length of the consequences of government debt levels in Europe does not appear to have fully sunk in.

Extremely insightful thoughts overall, especially the death of inflation targeting, the carry trade knowledge in the UK and the consequences for asset prices, eg housing, of free flow of investment funds (as opposed to free trade) given huge wealth concentrations of wealth and the trade and current account imbalances in the world.

Next I’m off to the OECD.


I’m going to be sending a few emails about the discussions I’m having while overseas. If you’d like to receive them, please click here.

Sticking up for your city

Posted by on April 22nd, 2012

It’s one of the main jobs of any member of parliament to stick up for your patch. You are elected by a constituency and they want and expect you to defend them and promote their rights. I don’t think constituents expect to get a better deal than anyone else in the grand scheme of things, but they don’t want to be treated with contempt and disrespect.

I don’t think it’s any surprise to anyone that I’ve come out fighting over the extraordinary, but probably predictable decision by Kiwirail to put the Hillside workshops up for sale. In Saturday’s Otago Daily Times I was quite forthright in expressing my views. I used some rather unladylike language and had to ring my mum the day before to warn her.

I stand by what I said. I think the government (and Kiwirail) have pissed on Dunedin. I think many Dunedin-ites agree. Saturday’s ODT editorial seems to agree too though in more polite terms.

I think that the only way we’re going to sort things is for Dunedin people to take control ourselves. And to have a future Labour government backing rail.

I’ll do my best to help find a buyer for Hillside. I’ll continue to take the fight to parliament and I’ll remain a thorn in the side of this government and the local National List MP Michael Woodhouse who has seriously let down the people of Dunedin in the pursuit of his own career. I’ll advocate for the need for and the importance of this industry to remain in public hands, and indeed to just bloody remain in our country.

When I took this job on I understood that there are times when sticking up for your city is more important than towing toeing a party line that you don’t agree with and which is going to hurt your city. It’s a judgement to be rarely exercised. Sometimes the greater good is more important than a local issue. But every MP should have the right and the responsibility to stand up for their city. This was one of those times. Woodhouse didn’t even think about it.

He blocked a select committee hearing on the petition signed last year by nearly 14,000 people (mostly from Dunedin) calling on the government to save the Hillside and Woburn (Hutt) workshops. He has never been held accountable for refusing to allow the people of Dunedin, the Hillside workers and their union to have a say before a parliamentary committee. He should be.

His government is negligent, disingenuous and downright liars about their responsibilities for Kiwirail and its decision and their knowledge of those decisions. As my colleague David Parker has said; if the KiwiRail board had made the same announcement without telling a Labour government, the board would have been sacked. It is just nonsense and untrue for shareholding Ministers to say they didn’t know Kiwirail’s direction and decisions. And it is very clear that they don’t oppose Kiwirail’s decision to sell Hillside.

There’s more at stake than the nearly 130 jobs, the loss of wages, taxes, skills and the more than 137 year history of a competent and valued rail manufacturing plant to the city of Dunedin. There are more than 70 engineering businesses clustered around Hillside. It’s the backbone of our city. It’s becoming more high tech. It’s a hugely important part of our local and regional economy.

This government doesn’t give a stuff. They allowed (and encouraged) it to be run down and now it’s being sold because Kiwirail says it’s not viable. Kiwirail deliberately made it unviable.

I ask you this. How is that that contracts have been handed to the Chinese to build rail wagons that are dubious in quality, when those same wagons could have been built here? They may have cost a bit more, but the workmanship would have been assured, the maintenance would have been less and have been more easily accomplished, and the people who built the wagons would have been earning decent wages and paying taxes in the New Zealand economy.

Kiwirail, and the government, has blocked any independent scrutiny of the dodgy process in awarding those contracts to China North Rail and the quality issues associated with the Chinese wagons. It’s time for some sunlight on both.

It is not false economy to manufacture in your own country. It’s our productive economy. I’d stand up for manufacturing jobs any day against paying for more pokie machines that create immeasurable social harm and are part of a mates deal to an organisation that will profit, might create a few more service economy jobs, but is unlikely add much more real value to our economy.

And I reckon that’s worth sticking up for.

Manufacturing renaissance

Posted by on February 26th, 2012

I’ve just been sent an article about a report released late last year by the Boston Consulting Group which elaborates on why there is an American manufacturing renaissance occuring. It’s a pity I didn’t have it last year. However, it just reinforces what is becoming accepted by many New Zealanders (and Americans) that manufacturing in their own country makes good economic sense.

A return of manufacturing to the U.S. will accelerate as companies take into account the full costs of outsourcing to China and the strategic advantages of making products closer to consumers in North America, predicts a new report by The Boston Consulting Group (BCG).

It argues that the rising cost of wages in China means that the advantage of lowest cost will continue to diminish. And also there are strategic advantages in locating production closer to the consumer and the downside of global supply chains.

All these reasons make sense. Along with the economic flow on effect of tax paid on wages inside New Zealand. And keeping and building a manufacturing skill base here.

I wonder when the light will go on with this government? Buying rail wagons from China which are of dubious quality because of lowest cost is not economically sound. And certainly isn’t good for New Zealand in the short or long term.

This is worth a read.

Trade policy to be released tomorrow

Posted by on October 27th, 2011

I will be releasing Labour’s trade policy tomorrow at my campaign launch in Nelson. That is a good place to do it because the Nelson region is built on fine primary tradeable commodities. And yet our exporters, from pipfruit growers to the forestry sector, are having difficulties of one sort or another. It should be up on the website by about 5.30pm. Watch this space – or one like it!

Comments Off on Trade policy to be released tomorrow


Posted by on August 22nd, 2011

A man came to see me. He was laid off a few weeks ago. He’s a mechanical engineer. Highly skilled. He has five children.

His wife has  cancer. Inoperable cancer.

He was chosen for redundancy. Involuntary. Along with others. He thinks probably because of his outspokenness.

He can’t pay his power bill this month.

There are no jobs. He needs to stay in Dunedin for his wife’s treatment. Meanwhile, she has been forced to work part time to keep food on the table.

This man was a valuable contributing member of our society. He paid taxes. His skills were worth something to our economy.

As a direct result of this government’s policies, he, and others like him, do not have jobs.

What are his options?

Yes I’m angry, because this is the reality that more people are facing each day.

And I heard today that the foodbanks in Dunedin are empty.

Dunedin is just one place where there is rampant poverty and need. But it’s where I live and these are the people I represent.

The importance of being Labour

Posted by on August 22nd, 2011

Have had a gutsful of the white-anting of Labour from both the right and the left of politics.

White-anting is an Australian expression. It means undermining. I lived there for 14 years, worked for the trade union movement and as a public relations professional. Proud of my time there, the work I did and the people I worked with.

I have strong enduring relationships with people across the right and left of the Labour spectrum.  In the last few days there’s been some very strong messages delivered about the importance of core Labour values. The compelling reasons for unions. And why there is a need for a strong Labour Party. And why Australia (like NZ) needs a strong manufacturing base.

All completely relevant here.

Paul Howes is the National Secretary of the Australian Workers Union. Over the weekend he sounded a strong warning that the high Australian dollar spells  the death sentence for Australia’s manufacturing export markets and for other sectors of the economy such as in-bound tourism and that diplomatic pressure should be put on on China to float the Yuan.

Today we see what he was referring to with the announcement of  1400 manufacturing jobs from BlueScope Steel in Port Kembla, south of Sydney. This is devastating.

THE loss of more than 1000 jobs at BlueScope Steel is a devastating blow for the retrenched workers and the manufacturing industry, the Australian Workers Union (AWU) says.

BlueScope confirmed today that it will shut down its number six blast furnace at Port Kembla, south of Sydney, and close its Western Port hot strip mill, east of Melbourne.

“Today’s announcement is devastating for the families of more than 1400 workers who will be feeling the trauma and distress that comes with the loss of a secure income,” AWU national secretary Paul Howes said in a statement.

It further strengthened the union’s call for action on the Chinese yuan, a robust anti-dumping system and strong local procurement policies for the resources sector, Mr Howes said.

The BlueScope closures sent a clear signal that Australian manufacturing was facing its worst crisis since the Great Depression, he said.

The Australian Manufacturing Workers Union (AMWU) said Australian manufacturing was under extraordinary pressure from the booming dollar, record high terms of trade and unfair competition from illegal foreign dumping.

“Local industry is not being given a fair go to work on the mining and resource projects which are driving the dollar sky-high, AMWU national secretary Dave Oliver said in the joint statement with Mr Howes.

Australia could not just rely on mining, Mr Oliver said.

Our economies are too important for the juggernauts of China and other bigger nations to turn us into service economies.

Strong Labour policies focussing on our economic sovereignty; owning our own future are what this country needs.

Kiwi jobs. Kiwi skills. Too important to sell overseas

Posted by on July 9th, 2011




Some photos from today’s rally for Hillside jobs in Dunedin. (Not quite sure what I was laughing about, or what on earth Pete is doing in the second pic).

More than a thousand people turned out on a bitterly cold Saturday to voice their disgust at the government and Kiwirail’s actions and attitudes in procuring lower quality, cheaper rolling stock from overseas, rather than having it made at home. Keeping skilled workers employed, and an important manufacturing industry sustainable.

The city is united on this issue. The Mayor, the Chamber of Commerce chair, three MPs, the union, Greenpeace and a Green candidate spoke.

My message was essentially that we have to fight for our city. For Dunedin’s future. Because this government won’t. We need these jobs, we needs these skills, we need this industry and it’s economic good sense. I also read out a strong message from Phil Goff.

The government and Kiwirail are telling lies about the cost of Kiwi trains. It’s time they were unmasked.

Our country is not a corporation. And this government can’t decide that parts of our country aren’t worth bothering about because our population base is lower than other parts, and because it’s a Labour town. Dunedin will fight back.

Dr Brash : The Washington Consensus is dead – the party’s over!

Posted by on November 4th, 2010

Reading the 2025 Taskforce report #2 reinforces what a lucky escape we had in 2005 when Don Brash and National were beaten by Labour in the general election.

If that hadn’t happened, by now we would be in Brashimania – the country’s assets would be sold off or privatised, NZ Rail and Air NZ would be in the hands of overseas interests, steadily being stripped again of assets, the minimum wage would be gone, the labour market re-regulated in an even more draconian way than the ECA, public health and education would be kneecapped with “competition”, early childhood education would only for those who could afford it, and welfare reforms would ensure that only the “deserving poor” had any assistance – with Dr Brash deciding who they were.

Don’t get me wrong. John Key’s NACTs are just as dangerous. They’re just a bit more careful and devious, because they’re scared of public opinion and know the electorate won’t tolerate another Douglas, Ruth or Brash attack.

The 2025 Taskforce, led by Dr Brash and his cheerleading group for ACT is costing NZers half a million bucks. It’s got another year to run. Yet, its members continue to insist that the failed policies of the 1980s and 1990’s will work now – even when they didn’t work before. Cuts to workers rights, minimum wage, cuts in Working for Families, an increase in the cost of student loans, and severe cuts in other government programmes,along with privatisation of more assets and services, including health and education are all there in report # 2.

Its pleasing to see the NZ Manufacturers and Exporters Association (NZMEA) criticising the report.  The NZMEA says that the report is long on diagnosis – (yes, that’s right, we all know Australian wages are way ahead of ours)- but short on therapy.

They say, in their press release that

The Taskforce’s recommendations largely echo the Washington Consensus.  This approach has not seen substantial export growth from the countries that have applied it.  Earlier this year, the IMF recommended more pragmatism on exchange rates from small economies instead.

And Dominique Strauss-Kahn, the Managing Director of the IMF said more just last Monday with this   :

…Such ‘growth models’ were unbalanced and unsustainable and inequality may have actually stoked this unsustainable model. In countries like the United States, borrowing seemed to allow ordinary people to share in the rising prosperity…. Inequality can dampen economic opportunity, by preventing the poor from accessing the financing needed to pursue profitable investments. It can divert people toward unproductive activities.

The Washington Consensus is dead. What we need are new ideas and new thinking – the kind that is coming through in Labour policy development that had Labour Party conference delegates buzzing about a different future under a Labour government.

The Taskforce seems incapable of new thinking and should be disbanded. It discredits the government who will once again ignore its recommendations – and it makes ACT look even more stupid than they are.

Dr Brash should give NZ taxpayers our half a million bucks back and accept that the party’s over.

Productive employment relations?

Posted by on July 17th, 2010

Members of the National Government say the word productivity a lot.  I certainly agree there is a need to lift our productivity as a nation.  However I get annoyed that there is little real action and no focus at all on workplace productivity.

In fact the track record of this Government, including the recent announcements on extending the 90 Day No Rights provisions and limiting union access to workplaces, has taken a cost reduction approach to employment relations.  Lifting employment standards and improving the quality of our workplaces doesn’t feature. 

In my speech on the Prime Ministers Statement to Parliament in February I made the following comments :

Where is the government investment in industry and regional economic development?  Where is the recognition that we need to lift the quality of workplaces – the wage rates, the work conditions, the quality of interaction. Productive employment relations. This Government sees workers and their rights as a cost to be reduced.

Look at the double speech in the PMs statement. Under the section on Better Regulation we have:

“Whether labour laws are imposing excessive costs on the country and holding back opportunities to create jobs”

Holidays and PGs not to mention union access to workplaces and collective bargaining. Remember what this meant last time and if we want to find reasons for the gap in income between Australia and NZ  this is a good place to start.

Attacking workers rights and reducing current standards will not encourage the motivated workforce we need. Failing to invest in improving skills in our workplace will  similarly not provide for a motivated workforce able to work smarter.  There were no new initiatives in the area of workplace learning in the Budget.  In fact under the Labour portfolio we see money moved from the Skills area to a completely different area of work.  The Skills Forum spoken about very positively by the Prime Minister at the CTU conference last year has met once under this Government (still we know how reliable undertakings made by John Key to the union movement are!)

A recent report on management practices in the manufacturing industry showed that NZ managers surveyed are “average to middling by global standards”  Furthermore people management emerges as the weakest area.  And we are going to give poor people managers the right to fire at will for 90 days (except for discrimination covered by the Human Rights Act)!

 A specific need identified in the Skills Strategy agreed by the last Government, Unions and Employers was around the need for more management training.   We need forward looking people management that recognises that paying more not less, improving conditions of employment and genuine flexibility and respecting the need for independent worker voice that is engaged in improving the workplace and the products and services created/provided  is what is required. Workplaces that are focussed on lifting productivity and where productive employment relations are seen as an integral part of this. We have some of these businesses but we need many more.

Fundamental to this approach is respect.  I know from my own experience as a union organiser that workers value and desire respect at work.   Respect for them as individuals but also respect for their unions.  They also want to work with and for employers they respect.   

I would like to see a real focus on productive employment relations but it will not happen under the approach being promoted by this National Government.

Controlling our own future: Kiwi Jobs Bill

Posted by on July 14th, 2010

I believe that New Zealand can only control its own future with strong, sustainable local industries. I would imagine that everyone reading this would agree, even if we don’t agree on how you get them.

Today I released the Kiwi Jobs Bill (PDF link), my first Private Members Bill which aims to maximise opportunities for competitive local businesses when tendering for large government projects.

The Bill establishes a Commission of Inquiry to compare government procurement policies in Australia and other comparable jurisdictions, to determine whether the NZ Government can have a policy that gives preference to local procurement without breaching our international trade obligations.

The Commission of Inquiry would have a deadline of six months to report to Parliament and the Minister for Economic Development would be required to decide within 30 days how its recommendations could be implemented.

New Zealand industries should be given the best possible chance of taking up new work within our shores by getting full, fair and reasonable opportunities to compete for tenders and major projects.

The Kiwi Jobs Bill is timely and important to provide encouragement and certainty to New Zealand industries that their skills and capabilities are important to our nation and our economic future.

Currently we have a situation with KiwiRail about to embark on a formal tender process to build 13 electric locomotives and 114 ‘cars’ for the electrification of Auckland rail.

Both KiwiRail and the government have ignored the strong independent economic case by reputable Berl Economics detailing the benefits of having Auckland’s new trains built in New Zealand, which could create up to 1275 new jobs.

It is currently unlikely that the tender document will contain a preference clause giving a stronger weighting to a build that includes Kiwi content.”

Most of our trading partners  have clauses giving preference to local companies in tendering for government contracts

These government procurement policies recognise that value for money is about a broader economic benefit and not just about lowest price.

Many New Zealand industries would receive a boost from such a policy, including manufacturing, engineering and ICT.

The most pressing example is obviously KiwiRail’s Hillside and Woburn workshops, whose skills and capacity would be taken more seriously with preference given to local content, in building trains for Auckland.

If we want to build the NZ economy, and one of the main ways to do that is to ensure our local industries are given maximum opportunities to flourish.

Instead, will we see a situation where the National Government will accept only the lowest-cost bid, or a bid from a big overseas company writing Kiwi skills off as irrelevant and ignoring them.

National is reviewing its procurement policies, but the review appears more motivated by saving money than by maximising opportunities to local industry and thereby boosting our economy.

I think it’s time we gave ourselves a better chance. I hope you will support the Bill.

Poll result

Posted by on June 18th, 2010

Last week Red Alert published its first poll.

The question was:  Should Auckland’s new trains be built in NZ?

The results were:

  • Yes (75%, 534 Votes)
  • No (25%, 176 Votes)
    Total Voters: 710

A fairly resounding result and a high response rate we think.

There were 53 comments and a very thoughful discussion about the issues around kiwi content in large government contracts and the capacity of NZ to build carriages and engines.
As you’ll see below we have another poll running and plan to run them three times a week on Mondays, Wednesday and Fridays.
We welcome your suggestions for polls.

Something new on Red Alert

Posted by on June 9th, 2010

We have just added a poll function. The first one is below. You have a week to respond. I hope you will.

You can send us suggestions for future polls. You know the rules.

Should Auckland's new trains be built in NZ?

  • Yes (75%, 537 Votes)
  • No (25%, 177 Votes)

Total Voters: 714

Loading ... Loading ...

Is this an important issue or what?

Posted by on June 8th, 2010

Hillside March 001

Today nearly two hundred plucky workers from Hillside Engineering in Dunedin joined by dozens of cold, wet but staunch fellow Dunedin-ites stood in the Octagon in a freezing southerly to tell the National Government that we need a strong rail industry.

Kiwi jobs for kiwi workers was the message, along with Can we build trains in Dunedin? Yes we can is the answer. At a competitive price. And in NZ Inc’s interests.

The case has been made. We have the skills and the capability. If we can’t compete on labour costs with the likes of China, we certainly can on quality and whole of life costs. And ability to deliver on time. The case for kiwi content stacks up.

Across New Zealand, people think it’s important that we build here, rather than go overseas. It’s a no brainer. Especially right now. We need to build confidence in our homegrown industry. We need to retain a manufacturing base. It’s at the heart of Dunedin’s economy, let alone important for the rest of NZ.

Why should the profit go elsewhere? At the very least, the bulk of the actual work should be done here even if we don’t hold the contract.

The EOI contains a limp clause about NZ content. It’s not good enough. There are two particular people standing in the way of NZ’s rail engineering industry having a future. Transport Minister Steven Joyce and Kiwirail CEO Jim Quinn. Neither of them believe in rail’s future. Both are trying to talk it down and to cast those who do support it as emotional rail enthusiasts.

Interesting, given the huge resurgence that rail is having elsewhere in the world.  Quinn has a job to do. Joyce has a political imperative. The thing about Joyce is that he’s too cold, too clinical and economic rationalists don’t always resonate.

And he’s made a mistake. He slagged off at Kiwi skills. And he hasn’t even bothered to come and have a look at Hillside.

Leaving aside jokes about animal behaviour, if Steven Joyce can’t make it to Dunedin to have a look at Hillside’s ability to manufacture trains, then he’s chicken. It’s obviously not a priority.

Today Labour had five MPs at the rally. Myself, Pete Hodgson and David Parker from Dunedin. Trevor Mallard from Hutt South (where Kiwirail has its Woburn workshops) and Darren Hughes, Labour’s Transport spokesperson. Phil Goff sent his apologies and his support along with a bunch of other Labour MPs.

Labour thinks that Kiwi content should have preference in the tender for the carriages and engines for Auckland’s rail system.

What does the Government think? Is this important or isn’t it?

So Steven, come to Dunedin. Are you chicken or what?

Watch this clip from Local Channel 9 to see footage  from today’s rally

Tax “Switch” is same old from National

Posted by on May 21st, 2010

I’ve been thinking about the hype the government has created about their ‘tax switch’.  True, by increased borrowing, they have shuffled a slightly larger amount than was expected, but it is still mainly a shuffle between taxing income and consumption which will have a limited effect on the shape of our economy. 

National has done what they always do – increased the proportion of tax paid by low and middle income groups and disproportionately decreased the tax paid by the wealthy. They have left capital untaxed. The switch to GST from income tax for low and middle income groups is largely illusory. GST is effectively a tax on labour for these groups, given that they have to spend all or virtually all of their wages/salaries on GST’d goods and services.

For those with higher disposable incomes,  the tax package make a significant change. They pay less. Their capital and intergenerational wealth transfers remain untaxed.  Inflated asset values – now  beyond the means of younger New Zealanders who have not inherited – will remain inflated. The intergenerational inequities on the economic as well as environmental front remain. Social mobility will continue to decline. Bernard Hickey’s analysis of this in recent months about this is spot on, and this budget does not do much to change it.

The tax bias driving excessive investment in property relative to the productive/ tradeable export sector remains. The constraint on claiming depreciation on buildings is a very timid step given the seriousness of the imbalance we now have. It hits commercial property as much as residential, and does not remove the more significant anomoly that allows a property investor to deduct from their other income losses from borrowing costs on their rental invesments, yet leaves them free to pocket capital gains (as an aside gains on property are seen as capital for tax purposes because the statutory definition of income assumes that income has a short-term temporal frequency, when in reality those who rent-out or farm property for a long term gain have a longer-term view of what amounts to their income).

Our lack of savings is only indirectly touched, and really only for those already better off.

As I said in my post earlier today (its worth reading the BERL budget analysis linked to that post), the current account deficit projected by this budget sees it climbing ever higher – up to 7%. So plainly the budget does not forsee a substantial increase in exports or savings.   

So where is the roughly 3% pa growth going to come from?  Well, as the BERL budget analysis shows, the assertion about a substantial increase in non-residential investment seems optimistic.  If that growth does not come to pass at all, or comes from a return to current account deficit funded consumption and property investment, then we will be even more in the cart.

The ‘switch’ is not turning the tradeable sector on and the speculative sector off. 

The ‘switch’ happening here is more akin to its other definition  – a whip – being used to protect capital and the capital class by decreasing their share of tax paid and increasing the proportion paid by the less wealthy. 

If this was going to fundamentally rebalance the economy, I might be able to see at least some justification. But the sad reality is this budget does little to rebalance the economy.  Rather it does just what National always does. It ‘rebalances’ taxes,  not the economy.

Keeping Kiwi jobs Kiwi#2

Posted by on May 9th, 2010

Solid support on the doorsteps of Dunedin yesterday for the right for Dunedin’s Hillside workshops to bid for the work to build Auckland’s electric trains. Even people who identified as National Party voters signed the railworkers’ petition.

Steven Joyce  made a mistake this week when he dismissed the capability of NZ’s rail workers to build locos and units for Auckland.

NZers do have faith in Kiwi skills and Kiwi ingenuity. This government doesn’t and they aren’t interested in creating Kiwi jobs.

If you support the railworkers at Hillside and the Hutt to get this work, download the petition here, print and get as many signatures as you can.

Does Steven Joyce believe in Kiwi skills and capability?

Posted by on May 3rd, 2010

Today a strong independent economic case has been made to spend close to $400m of taxpayers money building locomotives and rolling stock in New Zealand for Auckland’s electric rail. But it seems the government and Kiwirail senior management don’t want and don’t believe in a kiwi build.

A Berl economics report commissioned by the Dunedin City Council and the Rail and Maritime Transport Union details the benefits of having Auckland’s 13 electric locomotives and 114 “cars” built in New Zealand, creating up to 1275 new jobs.

The city council, chamber of commerce, local engineering firms, Hillside Workshops, the rail union and all of Dunedin’s MPs have been working on this issue for months quietly behind the scenes. Supported by the Hutt workshops and Hutt MP.

NZ has two railways workshops with considerable capacity and skill. Seems the Minister and the CEO of Kiwirail are impervious to this and intent on an overseas build. A draft capability report from within Kiwirail would appear to say otherwise. What is going on?

This is what Steven Joyce had to say in this morning’s ODT:

Transport Minister Steven Joyce, however, yesterday said he understood KiwiRail was not intending to enter a bid. It had never done anything similar before, and there were international companies with a lot of experience.

“It would be a bit like saying we need a fleet of high-end cars, let’s go and get our mechanics to build them, instead of buying them off Audi or BMW, or somebody who does this sort of stuff for a living.”

and in the NZ Herald:

But KiwiRail chief executive Jim Quinn, while welcoming the effort put into the exercise, said last night that the Government-owned corporation was unlikely to bid for its own contract.

“We haven’t made our final call but think it would be very unlikely,” he told the Herald. “It is hard to see any way we could be genuinely competitive – people around the world build these things for a living, and EMUs [electric railcars] are a sophisticated bit of kit.”

It’s extraordinary that Jim Quinn, not in the job for long, would dismiss out of hand his orgnisation’s own capacity. Where is his evidence? It’s my understanding that we do have the capacity to build in NZ.

The Berl report points out that while New Zealand could produce the rolling stock more cheaply than Europe or North America but “it may be possible” for Asian sources to supply at a cheaper price than elsewhere.

“However, the quality and expected life could be less and it was possible the “whole of life” cost of the rolling stock could be higher than for that made in New Zealand.

Why can’t we build these electric trains  in New Zealand Mr Joyce? Perhaps not every single bit of them. But we do have the skills and the capacity. And isn’t there a very strong case for keeping Kiwi jobs and skills Kiwi?

Doesn’t say much for the Minister’s confidence in the Kiwi workforce and Kiwi skills. Does this reflect the government’s view?

On-shoring a new trend?

Posted by on April 18th, 2010

I came across this article  from the Kentucky Courier Journal.

Some US manufacturers, including General Electric are finding reasons to bring manufacturing back to the US.

There’s even some buzz words being created around it.

“On-shoring,” “back-shoring,” and “re-shoring” are all buzzwords for a U.S. manufacturing industry hopeful for change after decades of being weakened by cheaper labor overseas.

If this is a trend, I’m all for it.

Hat tip: Andrew Casey

Should this be the way forward for NZ?

Posted by on February 21st, 2010

Whirlpool plans to start closing its refrigerator plant in Evansville, Indiana, on 26 March eliminating 1,100 local jobs. It has decided to shift its operation to Mexico. Why? Lower labour costs.

As the world’s largest home appliance maker, Whirlpool makes a healthy profit.

The AFL CIO (our CTU equivalent) reports Whirlpool has has received a $19 million economic matching grant that should be creating jobs  in America. They’ve started a petition to Keep it made in America

Sound familiar?

In April 2008 Fisher and Paykel announced about 1,000 jobs, or 28 percent of the total work force, would be lost in New Zealand, Australia and the northern United States as plants were relocated to Mexico, Thailand and Italy, where a similar number of new jobs would be created.

Fisher and Paykel said at the time that labour costs in Mexico were about a sixth of those in New Zealand.

Sooo… what happens next time there’s a plan to outsource, offshore, a lot of NZ jobs?

Or, next time there’s the potential to create and provide certainty for a bunch of jobs in New Zealand through investment in local infrastructure, such as the electrification of Auckland rail.

Are cheaper labour costs (in China, Mexico) the bottom line? Or should our economic development rest upon a wider set of values? Maintaining and building skills. Encouraging local innovation. Building our own export base. Keeping kiwi jobs kiwi.

And what should the role of government be?