Good buys, without leaving home

They're often more expensive and they're often harder to find. But would a New Zealand-made gift, rather than an imported one, be the patriotic choice this Christmas, considering the country already owes at least $61,000,000,000 overseas? Mark Price reports.

To the individual Christmas shopper it might seem a hopeless task - doing anything that will reduce the $61 billion national debt.

But, as University of Otago economist Dr Alan King points out, it was individual New Zealanders who "certainly had the power to run up the international debt in the first place".

Dr King considers one of the most effective ways individuals can help reduce the debt is by chosing to save rather than spend.

But it is Christmas. That's not going to happen.

So, putting economists aside for the moment, is the next best thing to saving simply to buy New Zealand-made?

We put a Christmas-themed scenario to put to various people who might know, including Finance Minister Bill English's office:

"A Dunedin arboriculturist grows a pine and offers it for sale as a Christmas tree for $30.

"A Dunedin retailer imports a plastic Christmas tree from a factory in Shanghai and offers it for sale for $30.

"For the sake of the national debt, which tree should the Christmas shopper buy and why?"One of Mr English's helpers responded that the choice "quite naturally" is in the hands of the individual.

"However, if they were choosing from two identically-priced trees solely on the basis of benefit to the New Zealand economy, they should buy the New Zealand-grown tree."

The reasons given by the helper were:

• "Because it is locally produced the money used to purchase it stays in New Zealand and does not increase our current account deficit in the way that purchasing imported goods does.

• "Because it is locally produced it contributes to New Zealand's GDP growth and any profits flow to the local producer.

• "This local economic activity supports local jobs."

So, like eating vegetables with the roast turkey, buying a New Zealand-grown Christmas tree is a good thing.

The problem is, the price tags dangling from the competing trees are not always the same.

New Zealand Retailers' Association chief executive John Albertson: "If you get to point of sale and there is a significant price differential, and there's no strong brand loyalty, people will be ruled by price."

And, being "ruled by price" generally adds up to buying the import because it is cheaper.

Christchurch journalism student and shopper Sarah Marquet set out last Waitangi Day to see if she could survive for a year living solely on New Zealand-made goods.

She proclaimed on her blog: "Remember, every time we buy something made in good old Aotearoa it puts money back into our pockets".

Nearing the end of her experiment, Ms Marquet told the Otago Daily Times buying exclusively New Zealand-made had "actually been quite hard" - particularly for a student who "didn't have that much money to spend anyway".

Aside from simply not being able to find New Zealand-made versions of necessities such as batteries and light bulbs, she discovered New Zealand-made goods were "often quite a lot more expensive" than similar imported goods.

"So it was always a bit of a struggle just having the money to buy the New Zealand-made things."

Her usual deodorant, for instance, cost $4 to $5 at the supermarket.

But, it cost $15 in freight alone to ship Auckland-made deodorant to Christchurch "which I think is absolutely ridiculous".

She tried lemon juice as an alternative.

But "it does nothing and just gets all sticky and makes a mess of your clothes."

She found New Zealand-made shampoo but it cost $25 for 250ml and she considered it of poorer quality than her usual imported shampoo costing $5.

"I get really frustrated at how most New Zealand-made things cost more.

"Why is it cheaper to buy a can of corn shipped from the other side of the world than it is to buy the stuff grown here?"

Ms Marquet did say it was "kind of worth it" to buy New Zealand-made.

"You know pretty much who's made it and I think that means a lot more than it's just come from China or Taiwan or wherever."

During her experiment, Ms Marquet has had to bend rules.

"I decided pretty early on, especially with clothes and shoes and stuff, that second-hand was OK because the money's still going back to New Zealanders.

"But I kind of limited myself to only if I really needed it."

Asked why she did not hunt for bargain clothing from within New Zealand's own high-profile fashion industry, Ms Marquet said: "Oh, good luck. There are only really, really expensive ones".

"The cheapest thing on the sale rack the last time I went was $350, which is way out of a student budget."

She also says New Zealand-made goods are quite difficult to find.

"It takes a lot of work to try and find [them] which is a bit of a pain and it's kind of sad because I'm sure they could sell a lot more if it was better advertised."

She says supermarkets need to make a bigger effort to promote New Zealand products and that a bigger New Zealand Made label is also needed.

"It's very tiny and it's always on the back of the packet. I think they need something more visible on the shelf next to the price maybe."

She had her greatest shopping successes online and was surprised by the range of New Zealand products there: "And it's really cool stuff."

Ms Marquest says she did not start out with an agenda to promote New Zealand-made.

"But I do think it's a very good idea. I like the idea of supporting my neighbours."

Ask Buy New Zealand Made spokeswoman Trina Snow if New Zealand goods really are more expensive and she says: "That's probably quite right".

She puts that down to a "reasonably high" minimum wage compared to China and other countries and "stiff" labour laws.

"The cost of making anything in New Zealand is always going to be a little more expensive than it is overseas because of our working conditions.

"So when you are buying New Zealand-made products you are actually supporting good working conditions."

Ms Snow says cost is also added by New Zealand's higher quality standards, which mean manufacturers cannot "deceive" customers with "rubbish".

"You generally know what you are getting when you are buying a New Zealand-made product."

Ms Snow works in the "very small" office of Buy New Zealand Made - an organisation funded by the New Zealand businesses that are its members.

Expanding the organisation depends on getting more New Zealand manufacturers on side but not all are convinced of the value of labelling their products New Zealand-made.

"A lot of companies still don't believe they need to because people who buy their products already know.

"So they are not catering for anybody new."

But the main problem, she considers, is with retailers.

"Some of the retailers actually take our members' labels, the New Zealand Made labels, off and put labels on which don't say where the product's made."

Ms Snow says she has been told by manufacturers who supply clothing shops their labels were removed for "aesthetic" reasons.

"They don't like them. I don't know why.

"A lot of the problem actually lies with the retailers not correctly marketing what the New Zealand-made products are and that's what makes it so hard for the consumers to actually find something that's New Zealand-made."

She considered retailers are "always looking to buy the product at the cheapest price, not considering where it is from".

"In New Zealand we seem to have a penchant for always marketing at price."

She says The Warehouse is one "price-driven store" willing to promote New Zealand-made products.

"They do it better than some other stores that probably could be and should be."

Mr Albertson, of the retailers association, believes the best way for New Zealand manufacturers to succeed in their price-driven home market is by working on their brand.

He regards Rembrandt Suits as a "classic" success.

"If you go and buy a Pierre Cardin suit, for example, you are probably likely to find on the inside of the jacket it's made in China.

"If you go and buy a Rembrandt suit you will find it's made in Lower Hutt.

"They've got a very strong brand and have been able to compete."

However, he says it would be "hell of a hard to start from scratch" now and create a brand to compete with international brands.

"Those ones that have succeeded tend to have been the ones that have been around for quite a while."

Mr Albertson has seen three or four buy New Zealand-made campaigns come and go.

"One would have to say that none of them have ever worked particularly well despite very high media advertising.

"For a campaign like that to really work, you need to have retailers totally on board.

"Retailers are not on board generally speaking because they can either buy better or they can buy a wider range or whatever from offshore.

"You would actually solve a lot of balance of payments issues if you had a lot more support for a buy New Zealand-made campaign but when push comes to shove the consumer tends to vote with their wallet."

In December 2008, Economic Development Minister Gerry Brownlee halted an $11.5 million "buy Kiwi made" campaign promoted by the Green Party.

He said no more money would be spent on it unless a review showed it to be effective.

In September last year that review concluded there was no evidence of consumers buying more New Zealand-made products as a result of the campaign.

"This was confirmed," the review said, "by the views of the largest retailers interviewed that the campaign was of little or no relevance."

It noted 82% of the campaign money was spent on media but the campaign was still not long enough to "achieve impact".

"It was recognised by those involved that a multiyear sustained campaign would be needed to change behaviour."

But even then, the review concluded there was "little evidence to demonstrate that it would necessarily be sufficient to be effective or be value for money".

The review said previous studies had found that "buy national campaigns are unlikely to significantly change behaviour, or to lead to significant economic benefits".

"However, the argument for firms themselves to promote their New Zealand country of origin on products, in a crowded marketplace, remains sound."

Economist Dr King points out Christmas shoppers can have an impact on the country's international debt by "spending less in total, and hence saving more".

"Basically, for the nation's foreign debt to be reduced, New Zealanders would need to collectively increase their rate of saving to the point where the country starts running current account surpluses.

"Deficit" has been the dominant word in respect of New Zealand's current account since about 1973.

Asked if buying New Zealand-made would help the situation, Mr King says: "It all depends".

"If the total amount spent on goods and services in New Zealand (over, say, a year) were greater than the total value of the goods and services produced in New Zealand over that same year, then by definition we must be buying the extra goods and services from abroad - i.e., New Zealand must be importing more than it exports, and so running a trade deficit (which is an important component of the current account balance).

"Suppose I were to then spend $X less (than I normally would) on imported toys and instead buy $X worth of New Zealand-made toys.

"That would leave my total spending unchanged and, if the total value of goods and services produced in New Zealand were unaffected by my action, the trade deficit would not change.

"But wouldn't the production of New Zealand-made toys increase?" Dr King asked himself.

"Quite possibly," he replies, "but if the workers and other resources used by the firm to make the extra toys had previously been making other goods for other firms, then the overall value of all goods made in New Zealand may not have changed.

"What if the workers etc had previously been unemployed?" Dr King went on.

"In that case, the total value of New Zealand's production would rise, but what happens to the trade balance would then depend on how that rise in production (and hence, national income) affects total spending.

"If the toy firm's workers and owners (and so forth) spend all the extra income they earned from my action, then the total value of New Zealand's spending and production would both have risen by the same amount and the trade balance would again remain unchanged.

"However, should they manage to save some of their extra income, then national income rises by more than national spending and the trade deficit would shrink.

"A third possibility is that if the growing demand for its toys inspired the firm to spend a vast sum expanding its production facilities, then (and ignoring all the downstream consequences of that investment spending for simplicity) the extra spending could outstrip the increase in national income and the trade deficit would (initially at least) grow in size.

"So, switching to New Zealand-made goods may have an effect on the current account and debt, but the effect could be positive or negative."

So, the bottom line remains, according to Dr King, that if all you want for Christmas is a bigger trade surplus then the way to do it is to go without the Christmas tree and resist the temptation to spend the $30 on anything else.


MONEY TALKS

University of Otago economist Dr Alan King: "The current account balance simply measures the difference between a country's income from abroad (from the export of goods and services, plus interest and profits generated by our overseas investments) and its foreign expenditure (on imports, plus the interest and profits earned by foreigners from their investments in New Zealand).

"When New Zealanders collectively spend more abroad than they earn, i.e., when there's a current account deficit, this excess spending has to be paid for with money borrowed from abroad, which adds to our stock of foreign debt [currently over $61 billion].

"Hence, to reduce our international debt we need to spend less than we earn and by so doing run current account surpluses. So, if New Zealanders were to cut their spending and/or raise their income, that would help shift the country's current account into surplus and start whittling away at our international debt."


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