In announcing manufacturing plant closures in Dunedin , Queensland and California , Fisher & Paykel Appliances took the opportunity to fire a few bullets in the direction of the Government and Reserve Bank. The persistent high value of the NZ dollar was cited as one of the reasons for the New Zealand plant closure, along with high freight costs and ever increasing business compliance costs. F & P have previously slated the RBNZ for an inappropriate monetary policy stance that has rendered manufacturing in New Zealand uncompetitive.

F & P Appliances, in a transactional foreign exchange risk sense, have not fared too badly in recent years, they are a net USD importer into New Zealand and export to Australia in AUDs. Both exchange rates have moved nicely in their favour in recent times. However they have suffered from a significant economic foreign exchange risk when relative labour costs are compared. A Mosgiel factory worker paid NZD20 per hour equates to USD14 per hour, nearly five times the hourly labour cost in Thailand and Mexico . Their decision on where they manufacture is not a difficult one from a shareholder perspective, but the NZ economy loses out as 450+ jobs are lost.

The F & P Appliances decision really brings home the extreme “collateral damage” impact on exporting industries caused by a tight monetary policy stance that has simply failed in its prime objective to contain inflationary pressures. Something clearly has to change with the monetary policy framework and the 1% to 3% inflation target. Unfortunately, the soon to be released Select Committee report on the monetary policy framework is unlikely to recommend any radical changes (or even minor changes) to the status-quo. Fisher & Paykel are at the coalface of international competition, product innovation and cost-competitive manufacturing, so their words of complaint and advice should be listened to very closely by those in Wellington.