Spin Cycle

by Pamela Stirling / 12 May, 2007

Did we forget something? Completely overlooked in the furore over the loss of manufacturing jobs with Fisher & Paykel Appliances' shift of its washing-machine production to Thailand was the fact that the company's share price immediately rose. Fisher & Paykel will gain a competitive advantage in Asia's low-cost environment - pre-tax savings are predicted to be at least $10 to $15 million annually - and in a nation not so obsessed with housing, that would be excellent news for investors.

But there's another reason that it matters: earlier this year the becalmed share price of Fisher & Paykel Appliances sparked reports of circling overseas interests, including the Chinese international whiteware giant Haier. The loss of jobs to Asia is a concern - although jobs in manufacturing here grew by 14 percent in the past six years. But a far bigger worry is the fact that unless enough New Zealand companies take urgent action to become truly multinational, our economy will be open prey. It will not be jobs going to Asia. It will be the profits.

Not that foreign investment is always undesirable. That would be hypocritical in the extreme, especially given the benefits Kiwi investors get from companies like Infratil and Fisher & Paykel with their interests overseas. F&P bought Italian company Elba SpA in June last year: it provides significantly increased distribution in Europe and reduces the company's exposure to the declining Australasian market. That's a smart move in every sense, and helps redress the appalling situation whereby New Zealand stands out as the only OECD country whose involvement with the world economy has actually declined since 1990.

Draw a circle of 2200km around any of Fisher & Paykel Appliances' competitors in Europe, from Dublin to Helsinki, and every one has a market of 350 million people. Draw the same circle around the East Tamaki plant and all you get beyond these shores are penguins and fish. New Zealand can never compete internationally on cost - a good part of the reason our exports have flatlined over recent decades at an alarming 30 percent of our economic activity.

And that's why there's a worrying element to the announcement of F&P's Italian purchase. Designs available from Italy meant cutbacks at the design division in Mosgiel. Those are exactly the high-value jobs New Zealand needs to keep - though assurances are that the Tamaki F&P designers will stay on.

If any company has been design-led, it's Fisher & Paykel. Products like the DishDrawer made this proportionately the most successful independent appliance manufacturer in the world. Right now, the water-efficient AquaSmart washing machine, recently released by F&P in Australia, is receiving plaudits for its design. The best news is that the design makes it the only top-loading washer in Australia to qualify for green initiative consumer subsidies. That surely deserves investor backing. If we're ever going to tackle the fact that Australia's GDP per capita is 30 percent higher than New Zealand's, this is the way to do it.

Consider the alternative: foreign investors lose confidence in our economy and decide to pull out of NZ dollar-denominated assets. It might cheer exporters. But it would hit households hard as the Reserve Bank increased the official cash rate to entice investors back into the currency.

We need urgently to correct the distorted message sent through our tax laws: save through shares in companies like F&P and you will be taxed to the max; borrow for investment property and you face no property tax and can deduct all manner of expenses. It's not a simple matter to correct: in the 1970s New Zealand had a property speculators' tax and in the 80s limited the amount of claimable tax losses on property investments to under $10,000. Both failed to stop property speculation. But our knuckle-whitening debt levels now - up 66 percent in five years on the back of easy mortgage credit - make it imperative to at least enforce the taxes we do have on reselling investment properties.

The critical thing, however, is to learn from Asia. Japan faced its own whopping increase in the exchange rate against the US dollar in the 80s - and used it as an

incentive to move companies like Toyota closer to overseas markets. The result? Toyota has just become the world's leading car company. Savers in Japan and similar places now fund a third of our bank funding. But let's not hand those investors our most iconic New Zealand companies as well.

Latest

Why you should avoid 'eating for two' during pregnancy
98747 2018-11-18 00:00:00Z Health

Why you should avoid 'eating for two' during pregn…

by Ruth Nichol

Doubling down on food during pregnancy is out, unless it’s diet quality we’re talking about.

Read more
The long, slow goodbye to Angela Merkel
99173 2018-11-17 00:00:00Z World

The long, slow goodbye to Angela Merkel

by Cathrin Schaer

German Chancellor Angela Merkel plans to leave the job in 2021, but that’s not soon enough for some.

Read more
Silent witness: The forgotten NZ movie star
97576 2018-11-17 00:00:00Z Movies

Silent witness: The forgotten NZ movie star

by Paul Little

One of the earliest and possibly least known NZ movie stars is Eve Balfour, a silent-movie actress, born in Christchurch in 1890.

Read more
How the Christchurch earthquakes inspired British writer AN Wilson’s new novel
99087 2018-11-17 00:00:00Z Books

How the Christchurch earthquakes inspired British …

by Sally Blundell

AN Wilson has put aside biographies for a novel inspired by quake-devastated Christchurch – where he expects the book will get a tough reception.

Read more
Victory over the All Blacks this weekend would add to Ireland's epic history
99193 2018-11-17 00:00:00Z Sport

Victory over the All Blacks this weekend would add…

by Paul Thomas

Kiwi Joe Schmidt has a chance of adding to Irish rugby’s storied history in the upcoming game against the All Blacks.

Read more
A big science investment - but where’s the transparency?
99199 2018-11-17 00:00:00Z Tech

A big science investment - but where’s the transpa…

by Peter Griffin

An extra $420m is being pumped into the National Science Challenges - but the reasoning behind the increased investment won't be released.

Read more
NZ music legend Gray Bartlett has a new album – and a wild past
99182 2018-11-16 13:32:58Z Music

NZ music legend Gray Bartlett has a new album – an…

by Donna Chisholm

We revisit this profile on award-winning guitarist Gray Bartlett, who's just released a new album, Platinum!

Read more
Vint Cerf: The father of the Internet reflects on what his creation has become
99178 2018-11-16 13:13:08Z Tech

Vint Cerf: The father of the Internet reflects on …

by Peter Griffin

"We were just a bunch of engineers trying to make it work. It didn't even occur to us that anybody would want to wreck it," says Vint Cerf.

Read more