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Recent key developments in MAKE│NZ
We’re on the hunt…
As our community grows and changes, so do we. We’re six weeks from our AGM and in that time we’re looking for leaders (and emerging leaders) who are passionate about manufacturing. We’d love nominations from you or anyone who you think would thrive on our board of directors.
Reach out to dieter@makenz.org if you want to help grow Canterbury manufacturing!
Notice from the Community –
One of our members has an overflow of Dacron offcuts they’d love to give away to someone who can use it or recycle it. If you or someone you know would like some Dacron – perhaps you’re re-upholstering some furniture or your local school could do with more arts and crafts supplies – please let us know and contact either dieter@makenz.org or sabine@makenz.org.
NZ Hardware Meetup will be hosting ‘Nerd Night‘ in Auckland with online access. While they already have some speakers lined up, they have an open casting call for any other tinkerers, hackers, and builders who’d love to share some innovations.
Nerd Night will be on Wednesday, August 27th from 5:30 to 8:30 – if you’re interested in presenting or tuning in you can find out more details HERE.
Last night we had Una Diver a partner from EY come and chat about the myths and legends surrounding remuneration. She spoke on the myth of remuneration stagnation, showing that while the median Consumer Price Index (CPI) has decreased over the past few years, the median actual base salary increases have remained fairly similar. In fact, she mentioned that setting your pay by CPI isn’t always the right move – “It’s not your role as an employer to mimic the cost of butter. It’s your job to fairly reward for work done and reward increases in capability.”
She also spoke on the motivations behind Gen Z when in the work place and how a key driver for them is the concept of fairness – not only for themselves but also their coworkers.
The topic was clearly enough to even pull in some new and rare faces – so a big thank you to those who attended despite the chilly winter weather. If there’s every a topic you think we should focus on at a Fireside don’t hesitate to let us know.
Recent key developments in New Zealand
•On July 21, Statistics NZ published the Q2 Consumer Price Index [CPI]. It rose 0.5 percent in the three months ended June, pushing the annual rise to 2.7 percent from 2.5 percent in Q1. As the Reserve Bank of New Zealand [RBNZ] points out, that number is within its target of keeping inflation between 1% and 3% over the medium term, with a focus on keeping future inflation near the 2% midpoint. All good, then?
The CPI is calculated as a compound measure of inflation in 11 groups of products and services. It is intended to reflect price increases experienced by the ‘average household’. It is in the nature of averages that they don’t’ describe individual circumstances very well. In the current example, if you take the case of a single superannuitant living in his/her own home, they may experience inflation quite differently. Annual inflation in the Food Group has gone up by 4.6%, electricity and gas 10.4 and 16.4%, respectively, Council Rates (not part of the CPI) 12.2% in 2024 – to name but a few. And the fact that petrol prices have dropped by 5.3 % may not do much for them to compensate the above.
Statistics NZ publishes a corresponding index for businesses, the Producer Prices Input Index [PPI]:
The index is measured in relation to a historic baseline. In percentage terms, producer input prices in New Zealand rose by 2.9% quarter-on-quarter in Q1 of 2025, marking the fastest pace of growth since Q2 2022.
According to Trading Economics, the increase was broad-based, driven by sharp rises in electricity, gas, water, and waste services.
Again, the PPI is an average across all businesses and, as shown above, the experience of individual manufacturing businesses can be dramatically different. We’ve seen the closure of major wood processing operations over the past 12 months, triggered by a steep rise in their cost of energy. And if you are a manufacturer using a lot of copper in your products, your margins may well be under a lot of pressure right now, with the price at USD5.60 per pound of copper:
Margin squeeze? The question will be what price rises for your products will your customers be willing to accept. That will in part be determined by your competitive position in the market, including what alternative products are available. It will also be driven by another average – Inflation Expectations. This is published by Statistics NZ based on a survey of forecasters, economists and industry leaders about their expectations of the future of the New Zealand economy.
Recent key developments in the World
•On Liberation Day (April 2, 2025), the talk was all about fair trade – or, to be precise, introducing tariffs so the US would no longer be exposed to “hugely unbalanced trade relationships”, resulting in large trade deficits. A good summary of the US government’s rationale behind imposing those tariffs can be found here. It was all (meant to be) about economics.
Since then, things have changed. The US government has ‘discovered’ that tariffs can also be used as a lever to achieve ‘world peace’. US Treasury Secretary of the Treasury, Scott Bessent, explained that very well in a recent interview with FOX News: “There is a lot of bi-partisan support to give President Trump extra authority against Russia, on Russia sanctions … now the Senate agrees with President Trump that tariffs can be used as a negotiating lever. anybody who buys sanctioned Russian oil will be subject to a 100% tariff. … President Trump has changed the narrative here, that tariffs can be used for negotiations away from just economics, but for world peace.”
Let’s just hope that our government will never do anything that the current US President – or any future President – would consider a threat to world peace. Not that that would happen … unless – China?
Over the last few days, ‘deals’ on tariffs and related matters have been signed between the United States and Japan, and the United States and the European Union, respectively. In both cases these ‘deals’ substantially change current trade relationships in favour of the US. It has also become clear since then that these aren’t actually ‘deals’ at best they are ‘heads of agreement’.
A ‘deal’ generally refers to a final, legally binding agreement, while a ‘heads of agreement’ is a preliminary document outlining the key terms of a proposed agreement before a final, legally binding contract is executed. Heads of agreement are typically non-binding, except for certain clauses like confidentiality, whereas a ‘deal’ represents a fully executed contract with legal obligations.
Probably more than a legal technicality, because there still appears to be a lack of detail on, and different interpretations of, what was agreed in both cases. For Japan, a report in the Japan Times on July 26 highlighted a number of such unresolved areas and quoted Japan’s top trade negotiator, Rysosei Akazwa, as saying that “Japan is not currently considering making the deal legally binding by incorporating it into a joint-document -type agreement”.
We need to be quite clear what is happening here. The use of trade sanctions and tariffs as a means of achieving political goals and gaining commercial advantage is not new at all. However, until quite recently there was a system in place that worked to prevent at least the most systematic and egregious violations of what would be considered the rules of fair trade. Remember the apple export dispute between new Zealand and Australia that was resolved in New Zealand’s favour in 2011 by the WTO’s Appellate Body?
That system of structures and processes was established in 1947, when, on 30 October, the General Agreement on Tariffs and Trade [GATT] was signed by 23 nations. Over time, the organisation grew, and on 1 January, 1995, GATT was re-constituted as the World Trade Organisation [WTO]. Today the WTO has 166 member countries. It has (had) an elaborate mechanism to resolve trade disputes between nations, at the top of which sits an Appellate Body making final decisions. Since 2016, the US government has blocked appointments to the Appellate Body, resulting in a shortage of judges that means that, as of December 2019, the body does no longer have a quorum to make decisions. This obstruction effectively suspended the WTO’s dispute settlement system and means countries can break WTO Rules without fear of legal consequences.
What is happening now is the unfettered use of trade-distorting measures by countries acting from a position of real or perceived strength. New Zealand, in spite of its strong role globally as an exporter of dairy products, is not in apposition to approach other countries with an “or else” approach. That cannot be good news for New Zealand exporters.
Just as an aside, this “might is right” approach also leads to some slightly bizarre behaviours. Having just been’ encouraged’ (“or else …”) to agree to a ‘deal’ that clearly favours the interests of the USA over those of the EU, the President of the European Commission, Ursula van der Leyen, in her speech announcing the deal, included the following comment: ”Finally, I want to thank President Trump personally for his personal commitment and leadership to achieve this breakthrough.” …
•The development of new technologies appears to be happening at an accelerating rate, and it’s getting harder to separate the gimmicks from technologies that may actually help to improve manufacturing in the (near) future. Take this, for example:
It’s the prototype of a wristband you wear on both wrists that allows you to undertake remote manipulations. Developed by a team of researchers in Meta Platforms’ Reality Lab, and published in a recent article in nature under the title of “A generic non-invasive neuromotor interface for human-computer interaction”, this device directly interfaces with the body’s electrical signalling, read via the wristband, to enable gesture-based remote operations, including handwriting. There would certainly be applications for this in manufacturing, if it were to become operationally available. Remote manipulations in hazardous environments, for example. This would be a significant step up from the haptic gloves currently available commercially already.
•Remember Investment Boost – the 20% accelerated-depreciation announced in this year’s government Budget. Well, the US equivalent has got a fancier name – OBBBA, the One Big Beautiful Bill Act, signed into law on July 4, 2025. And it’s got fancier provisions, too, allowing businesses to immediately expense the full cost of qualifying equipment, machinery, and other fixed assets in the year they are purchased. ‘Qualifying assets’ include vehicles, furniture, manufacturing equipment, heavy machinery, computer software, and qualified improvement property for commercial buildings.
Will it work? Data from the Federal Reserve shows industrial production of business equipment in Q2/2025 has risen by 7.9% compared to Q4/2024 – which would have been in anticipation of a bill that only got enacted after the end of the quarter.
The OBBBA also reinstates immediate expensing for domestic research and experimental (R&E) expenditures, effective for tax years beginning after December 31, 2024. This reverses the previous requirement to capitalize and amortize domestic R&D expenses over five years, which had been in effect since 2022.
Companies can now fully deduct domestic R&D expenditures in the year they are incurred, including software development costs, wages for employees conducting research, supplies and materials used in R&D activities, and contract research expenses.
In combination with import tariffs, it will be interesting to see how well OBBA is going to work as intended, re-industrialising the country , especially when combined with arrangements like the US$550bn investment and loan guarantees provided by the Japanese government and other agencies to enable Japanese firms “to build resilient supply chains in key sectors like pharmaceuticals and semiconductors,” as announced by Prime Minister Shigeru Ishiba. And the US$600bn investment by “the EU” over the course of President Trump’s term, announced by the White House on July 28.
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