Exports

“It’s time we got patriotic about our manufacturing industry”

Tuesday August 28, 2012 Fiona Stokes

So says Labour leader David Shearer after his visit this week to Kiwirail’s Hillside workshops in Dunedin.  This is like music to my ears. 

 

In 2010, BERL prepared a report for the Rail and Maritime Transport Union and Dunedin City Council that focused on the likely economic benefits to New Zealand of building new rolling stock here rather than importing them. 

 

 

  • At that time, the Government had announced a budget of up to NZ$500 million for the purchase of rolling stock for Auckland, with a proposed delivery schedule to begin in the first quarter of 2013.

 

  • Our research suggested that overseas manufacturers would need to produce the rolling stock at between 29 percent and 62 percent less than the price of manufacture in New Zealand to offset the benefits to New Zealand GDP of producing the trains here.  This range was dependent on whether only the direct benefits were considered (29 percent) or the total benefits (62 percent) to New Zealand GDP.

 

  • In addition, we also argued that there needs to be some consideration made about “whole-of-life” costs, rather than just initial manufacturing costs.  Even if an overseas supplier could produce the rolling stock at a lower price than that of producing it in New Zealand, there may be substantially lower "whole-of-life" costs in making the trains here, with better access to ongoing maintenance facilities.

 

The Hillside workshops are currently up for sale, and may close if a buyer is not found.  It seems an opportune time to revisit this research and highlight some of the further economic benefits that we discussed in this report.

 

These benefits will also be lost if the workshops close and include developing and maintaining skills in New Zealand; opportunities for innovation and technology spillovers to other industries in Dunedin and further afield; ongoing maintenance contracts with associated jobs and contribution to GDP; reduced exchange rate risk or risk-minimisation costs; and Crown revenue and trade balance benefits.

 

 

This business case, although prepared in 2010, remains very relevant in 2012.  Although it is rather ironic in the current environment that David Shearer calls the workshops a “national asset” and argues that they shouldn’t close or be sold. 

 

We don’t even need to be patriotic about such things.  There is a strong economic case, as shown in our report, that the Hillside workshops in Dunedin should remain open.