As the peak representative body for the export sector, ExportNZ keeps its ear to the ground. Catherine Beard reports on what’s currently keeping exporters awake at night.
The past 12 months have been exceptionally challenging for New Zealand exporters, and the DHL ExportNZ Barometer survey is one tool we use to take stock of the core issues facing exporters. The 2021 survey results painted a clear picture of the leading barriers to exporting:
- The cost and availability of transport and logistics.
- The inability to travel due to COVID-19 restrictions.
- The high cost of doing business in New Zealand.
So, one year on, what’s changed?
We recently completed our 2022 survey and by far the largest barrier to trade today is the rising cost of doing business. Exporters have to contend with runaway shipping and logistics fees, the high cost of labour and the lower value of the New Zealand dollar (NZD). Combined, these amount to a significant squeeze on an exporter’s margins – more so if they’re unable to pass on those cost increases.
Shipping and logistics
The survey’s results tell us that by a wide margin the largest barrier to exporting from New Zealand is the cost and availability of transport and logistics, with nearly two-thirds of all respondents selecting this as a major barrier. We also asked respondents which of them had experienced delayed transit times, increased costs, or shipping space unavailability. A majority had been impacted by both delayed transit times and increased costs (88 percent), while almost half had faced shipping space unavailability (47 percent).
Only four percent had not faced any of these issues.
This all adds up for exporters. Whether it’s port congestion around the world, the scarce availability of containers and ships, or labour shortages on the docks, it’s costing more to produce and move goods, leading to tough decisions for businesses to either wear the cost themselves or pass it on to their customers.
Anecdotally, lately we have heard stories of Kiwi exporters looking to establish themselves with an overseas office and offshore manufacturing sites. The impact of the New Zealand labour market and cost of doing business is pushing Kiwi firms out. It starts to make sense given the current climate our homegrown exporters find themselves in. No matter what, we are still a remote island nation, and you stand to make a significant dent in shipping and logistics costs if you’re manufacturing closer to your market.
The cost of labour
Access to skills and labour has been the number one issue for businesses in other recent business surveys, so it is interesting to see the majority of exporters surveyed say they are not struggling to fill job vacancies (63 percent).
Labour shortages are also lower on the list – ranked as the fourth largest barrier to exporting.
There could be a few good reasons for this. Evidence shows that exporting firms often pay higher rates than non-exporting firms. The roles are often medium to highly skilled, making the vacancies more appealing to job seekers with the right qualifications.
The roles are also more productive and employees are being offered more generous packages. Things like sign-on bonuses, relocation packages as well as higher starting rates – both here and abroad.
So how do we start repairing the hole left by the labour crisis? New Zealand has skill shortages across the board and net loss migration which is compounding the issue. Immigration has always been an important part of our economy – it’s vital that our immigration policy is as effective and efficient as possible, with a co-ordinated global attraction strategy in place.
And it’s going to be a battle. As New Zealand reopened to the rest of the world, we’re seeing that we’re not the only ones trying to successfully bring back international skills and talent. Getting our immigration settings right is an important piece of that puzzle, ensuring Kiwi businesses and exporters can survive and thrive in a post-Covid environment.
The value of the dollar
Many New Zealand businesses would benefit from an increase in their prices, but find they are unable to reflect the increasing effort that goes into production for fear of losing their competitive edge globally. In order to stay competitive, Kiwi exporters have historically had to keep their margins lean in order to compete with domestic brands on the same shelf – even if ours is the premium option.
Exporters have told us they are concerned with the relative weakness of the NZD. This ties directly to the things keeping exporters up at night: The cost of importing materials from overseas has increased significantly over the past few years.
Previously it was just the opposite. The strong NZD had exporters concerned over its impact on export sales.
For further reading, see the full 2022 survey results at: www.exportnz.org.nz
Catherine Beard is executive director at ExportNZ.