Story: Factory industries

Page 5. Inflation and deregulation, 1970s to 2000s

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For nearly 35 years factory production had surged ahead in employment, scale and the range of goods offered. However, rising inflation, triggered by the 1973 and 1978 oil shocks (massive and sudden price rises), put severe strain on the protectionist model of economic development, which restricted imports, especially within the manufacturing sector.

With inflation pushing prices up, factory industries were hit by rising costs. While still protected by import controls, firms could pass some of these costs on to the consumer.

Deregulation

From 1984 import licensing was dismantled, subsidies removed, and tariffs progressively reduced. Many factory industries struggled to compete against lower-priced imported goods. In some cases, goods were produced in countries with significantly higher rates of mechanisation or automation in their factories, such as Japanese car plants. In others, such as the clothing and footwear industries, lower input costs and rates of pay were an advantage.

Domestic production of some goods, including cars and electrical appliances such as radios, televisions, and washing machines, was progressively wound down.

Competition was not the only problem factory industries faced in the 1980s and 1990s. An oversupply of processing capacity, and higher standards required by export destinations, led to the closure of many meat works. Among them were the Gear meat works in Petone (1981), AFFCO’s Southdown freezing works (1981), and works in Pātea (1982), Whakatū (1987), Tōmoana (1994) and others in Gisborne and Hawke’s Bay.

Factory employment

As a result of restructuring, which coincided with an economic downturn, many factories closed down, with resulting unemployment. The clothing, footwear and textile industry, for example, which had employed 47,961 people in 1976, dropped to 26,604 in 1992, and further to 16,058 in 2007. In small towns where one or two factories were the major employers there was significant loss of population, as people moved elsewhere to find work.

Death of a town

 

When Pātea’s freezing works closed ‘it was the death of the town’.1 The population dropped from 2,000 to 1,140, the school roll dropped from 400 to 250, the town’s three doctors, one solicitor and two accountants left, and the 53-bed hospital and five banks closed. Job opportunities were very limited and in 1993, 11 years after the works’ closure, 61% of the population was on a benefit.

 

Export-led recovery

Exporting led a recovery in numbers of factories and people employed within them. Diversification of both the goods produced and the markets to which they were exported took place in response to trade liberalisation. Much of this diversification was in non-agricultural industries.

By 1995, 25% of New Zealand manufactured products were exported, up from less than 20% in 1980. In the 1980s, prior to deregulation, meat and dairy products were the largest categories of New Zealand factory produce exported. By 1995 meat, wool and dairy accounted for only 38% of exported product in comparison with 84% in 1960. This trend continued – in 2008, meat, dairy and wool were 35.8% of exports. Plastics, organic chemicals, paper and paper products, electrical and electronic goods and machinery all showed substantial growth from 1991 to 1996.

Overseas ownership

In the shift from a highly protected environment to a deregulated market, some firms were bought by overseas owners. Wattie’s was sold to Heinz, DB Breweries to Dutch conglomerate Heineken and specialised saw-blade manufacturer Izard to the US-based Irwin Industrial Tool Company. These firms have pointed to gains from such a transition, including improvement to operating procedures and access to international management expertise and markets, though it has meant profits have been gone to overseas owners.

Emerging trend

An emerging trend in the 2000s was a new model of factory management that combined efficient production processes with both local and overseas factory ownership. Furniture and mattress makers Sleepyhead and Criterion Furniture, and electronics firms PDL and Tait Electronics all had operations both in New Zealand and overseas.

With increasing international operations, the number of employees in New Zealand factories alone no longer reflects the nature of contemporary New Zealand factory industries.

Footnotes:
  1. Quoted in Mick Calder and Janet Tyson, Meat acts: the New Zealand meat industry, 1972–1997. Wellington: Meat New Zealand, 1999, p. 191. Back
How to cite this page:

Ian Hunter, 'Factory industries - Inflation and deregulation, 1970s to 2000s', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/factory-industries/page-5 (accessed 22 November 2017)

Story by Ian Hunter, published 11 Mar 2010