2 Jun 2009

Bad news looms for manufacturing industry

6:53 am on 2 June 2009

The embattled manufacturing sector could be dealt another blow, as the fortunes of one of the country's biggest trading partners look set to take a turn for the worse.

Over the past week, Australian iron ore and coal miners have started signing bulk commodity contracts with major customers at prices up to 45% below last year.

BNZ Capital says that is likely to result in significant falls in investment spending over the next 12 to 24 months, providing a major drag on Australia's economic growth.

BNZ market economist Mark Walton says that could also be bad news for New Zealand manufacturers.

He says Australia is New Zealand's largest trading partner for goods exports such as machinery and industrialised goods.

Mr Walton says there are already signs of exports of those goods weakening.

He says if investment in the mining industry tails off, that will result in less demand for manufactured goods from New Zealand.