Manufacturing Matters- Tuesday Top-Up 15

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Recent key developments in MAKE│NZ

• Something else we’re going to try, so it’s not just all dry statistics and bad news … We know you are all really good at using the web to retrieve information. This is about something else – your ability to make educated guesses (unless you know the answer already, of course). We’ll have one of these each week:

This week’s question: What is Switzerland’s biggest source of export revenue, looking at both goods and services exports?

The person coming up with the closest answer first will go on our MAKE│NZ Guessmasters’ Honours Board in next week’s edition, together with the correct answer. Please email your guess to dieter@makenz.org

• Last week we had our first foray into 3rd-party meetings, co-hosting an afternoon with Swell Group to talk about the possibilities of R&D funding from the government. Swell Group are a service provider helping business to access government funding.
John O’Callaghan, Fabrum’s CFO, provided an example of successfully getting funding with support from Swell Group, and Nick Prattley and Michael Barry from Swell explained that while it can be challenging to get funding, and not everyone is necessarily eligible, more companies are actually eligible than you might expect. Innovation activities that qualify for government funding are more common than many manufacturers think. However, in order to qualify, these activities have to be identified and separately recorded and accounted for. Failing to do so is often the first major hurdle.
Finding out that innovation activities carried out even under contract manufacturing arrangements can be eligible for funding through the government and Calloghan Innovation came as a surprise to much of the audience, especially given how tricky IP arrangements for that can be at times.
If you wanted to attend but weren’t able to and would like to learn more about what was discussed, or if you’d like to get in touch with the team at Swell Group, don’t hesitate to reach out to sabine@makenz.org or Michael.barry@swell.co.nz.
As mentioned, this is a new meeting format for us, and we’d love to get some feedback. If you’d like us to organise other 3rd-party/vendor meetings in future, please let us know who you’d like to see or what you’d like more information about! And as a reminder, with our new membership model requiring either annual membership subscriptions or per-event payments to attend, these collaborative meetings with vendors will not require payment on the part of the attendees.

• Last week we had an interesting meeting with one of our Manufacturing Alliance colleagues, Nick Collins, and the Labour opposition’s spokesperson for climate change, energy and resources, Dr Megan Woods. The meeting was part of the Alliance’s drive to secure a reliable supply of electricity for New Zealand’s manufacturers in the long term and at prices that allowed manufacturers to remain globally competitive. The Alliance has developed a good working relationship with the current Minister and Associate Minister for Energy, and the aim for the meeting with Dr Woods was to explore what the chances are for a bi-partisan approach to developing a 10- to15-year plan for the electricity sector – something manufacturers will want to see when making significant investment decisions in new factories, etc. For such a plan to be viable and credible, core elements of it must be agreed by both major parties, given the nature of our political system

Recent key developments in New Zealand

• Want to hear another Good-News story? Economic statistics can often be calculated, reported and interpreted in more than one way – entirely legitimately, and not in the “lies, damn lies, and statistics” way. That is particularly true when it comes to the wealth of a country, and its population. The Economist has recently published its latest wealth ‘league table’ (https://www.economist.com/graphic-detail/2024/07/04/the-worlds-richest-countries-in-2024 ) It uses three measures to define wealth: GDP per capita, a broad measure of productivity, GDP per person adjusted for local prices, and adjusted for local prices and hours worked – it does make a different whether a certain per-person GDP figure is the result of a 35-hour work week, or a 42-hour work week, for example. As the graphs below show, we’re behind Australia, as can be expected, but on par with, or even better than Japan – which may come as a surprise to some (all in USD):

Country \ Measure	GDP per person at market exchange rates	same, adjusted for price differences	same, adjusted for price differences and hours worked
Australia	$64,700	$69,100	$67,300
New Zealand	$48,500	$54,100	$49,800
Japan	$33,800	$50,200	$49,200

In the greater scheme of things, though, we’re still not at the top table – even Australia only scrapes in at #20. One has to take these ‘league tables’ with a grain of salt, however. Luxembourg notoriously finds itself among the top five – primarily as a result of the fact that a lot of large international companies nominally have their seat there because of Luxembourg’s favourable tax rules.

Recent key developments in the World

• We have in the past (with a degree of envy) pointed to the fact that successive Australian governments have been much more inclined to provide significant material support for manufacturing than their New Zealand counterparts. Their current Labour government is no different. A lot of the attention at the moment is focused on its Future Made in Australia Act, now before the Senate after having been passed by Parliament (House of Representatives). The bill “links challenges of climate change and national economic capability to reindustrialisation, predominantly using Australia’s world-significant clean energy and critical minerals to increase onshore secondary processing of these metals and the manufacture of products and components required for decarbonisation and greater sovereignty.”
(https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A”legislation%2Fbillsdgs%2F9882578″ – the full text contains lots of useful background information)

What is interesting is that the approach here is to establish the key future link between access to (affordable) clean energy and the ability to grow manufacturing in the context of the Australian economy and the resources at its disposal: “The prohibitive cost of long-distance imports means that energy-intensive industries will inevitably migrate to regions with cheap clean energy. It is inconceivable for any country to import iron ore from Australia or Brazil, hydrogen from Australia, the Gulf, Canada or Africa, and make steel at a globally competitive cost.” (see above for the source)
Following that logic, the vast majority (87%) of the AUD 22.7bn proposed expenditure over the next ten years will go ‘Making Australia a Renewable Energy Superpower’, with a focus on developing the combination of hydrogen, solar power generation and battery storage technologies.

What we have here is a big-picture, comprehensive economic development strategy. We can look at that at two levels. One is the strategy itself, the design and direction of which we can agree, or disagree with. At a more general level is the fact that the Australian government is making a prominent effort to develop a comprehensive strategy to develop the country’s economy and make sure future generations will have the money to pay for excellent hospital care, etc. – something (both an economic development strategy, with manufacturing at its core, and excellent hospital care) we have been sorely lacking in New Zealand for a number of years now.
The Bill itself has been stuck in the Senate for weeks now, with objections mainly from the Greens, and may never see the light of the day – but that’s another story.

• When it comes to support for the wider manufacturing sector in Australia, the groundwork for that has been completed in 2023 with the establishment of the Australian Government established the National Reconstruction Fund Corporation (NRFC). Purpose of that fund, with a budget of AUD 15bn, is to support 7 priority areas of the Australian economy. The NRFC can provide finance in the form of debt, equity and guarantees to support Australian projects that drive high-value industry transformation. You can find more details on the NRCF here.