Latest / Best of Business / Brad Olsen: Infometrics principal economist on the economic impact of Winstone Pulp International closing Ruapehu mills

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Brad Olsen: Infometrics principal economist on the economic impact of Winstone Pulp International closing Ruapehu mills · Best of Business

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  Speaker 1: You're listening to a podcast from Newstalks. The'd be follow
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  Speaker 2: Now we've been talking about the Real A Pair Who District,
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  Speaker 2: the fact that it's been dealt a huge blow with
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  Speaker 2: today's announcement that Winstone is going to close two mills
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  Speaker 2: in the region. Around two hundred and thirty workers are
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  Speaker 2: set to lose their jobs and the mayor Western Curtain
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  Speaker 2: is gutted. The government wasn't able to broker a deal.
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  Speaker 3: This is a big hit, Heather. I've had ups and downs,
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  Speaker 3: as you know, but this is a big hit. I'm
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  Speaker 3: really taking it personally to these companies seem to be
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  Speaker 3: milking the system and then when it gets to paying
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  Speaker 3: it back to the communities or if not, these businesses
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  Speaker 3: that they're working hard on our behalf.
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  Speaker 2: It just doesn't add up infa metric principle. Economist Brad
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  Speaker 2: Olson is with us. Now, Hey Brad, good evening, Brad,
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  Speaker 2: what proportion of the economy and the re A Pair
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  Speaker 2: Who were these two mills?
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  Speaker 4: Look, it was a substantial proportion. Around about three and
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  Speaker 4: a half percent of Real Pair Who District's entire workforce
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  Speaker 4: was employed at the mill, so it is a substantial hit. Now.
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  Speaker 4: Of course it's not just that three point four four
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  Speaker 4: percent of total employment directly, but it's all the other
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  Speaker 4: businesses in Real pay Who that supported those mills with
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  Speaker 4: various you know, supplies and similar so there is a
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  Speaker 4: much wider challenge coming through I think important as well.
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  Speaker 4: When you look through the numbers, we can see that
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  Speaker 4: already over the last year, up until June, there was
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  Speaker 4: a two point three percent fall according to our analysisative
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  Speaker 4: metrics of fuel jobs and all pay Who's, so those
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  Speaker 4: jobs figures were already coming down. It's tougher now because
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  Speaker 4: of the mill closures. You've of course had the uncertainty
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  Speaker 4: because of Real pay Who Alpine lifts, what's been happening
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  Speaker 4: on both sides of the mountain. So an already very
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  Speaker 4: difficult situation has become even more difficult with those closures.
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  Speaker 4: So a big hit to the community and I sort
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  Speaker 4: of think it's one of those areas where Real pay
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  Speaker 4: Who is likely one of the hardest hit parts of
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  Speaker 4: regional and rural New Zealand at the moment.
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  Speaker 2: Yeah, I mean you've got this, You've got the Tongrero chateau,
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  Speaker 2: you've got the ski fields at the moment. How does
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  Speaker 2: it feel to you? Does it feel like this is
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  Speaker 2: a place that's a bit stuff I wouldn't.
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  Speaker 4: I wouldn't say that. I mean, there's still a lot
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  Speaker 4: going for the area, but it's quite clear that the
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  Speaker 4: operating environment is a lot more difficult. I mean, it's
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  Speaker 4: I think also worthwhile bearing in mind that we do
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  Speaker 4: see some of these challenges cropping up across different parts
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  Speaker 4: of the country. Real pay who's obviously sort of the
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  Speaker 4: post child and really in the thick of it at
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  Speaker 4: the moment, but it highlights that where you do have
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  Speaker 4: some of those sort of bigger anchor employers in particularly
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  Speaker 4: provincial New Zealand, you know, the change in fortune for
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  Speaker 4: that anchor, provided that anchor employer, can have a big
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  Speaker 4: influence on the wider economy. I think the challenge all
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  Speaker 4: the difficulty here is that although you've seen electricity wholesale
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  Speaker 4: prices that have come back towards sort of much better
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  Speaker 4: positions over the last week or two, hydro levels have
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  Speaker 4: come up in similar the fundamentals those for the mills
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  Speaker 4: just didn't stack up anymore. You've got the potential for
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  Speaker 4: those energy costs despite higher but more Importantly, commodity prices,
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  Speaker 4: particularly for forestry and wood based products, just aren't in
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  Speaker 4: a sustainable area at the moment, and so if you've
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  Speaker 4: got low prices that you're getting in high costs that
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  Speaker 4: you're having to pay out, those numbers just don't start
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  Speaker 4: to stack up. From a business point of view.
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  Speaker 2: Do you think this will be the end of the
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  Speaker 2: closures because of energy costs?
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  Speaker 4: Not necessarily. I think there's a lot of businesses, particularly
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  Speaker 4: in that sort of forestry based area making sort of
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  Speaker 4: wood based products that will still be considering. Yes, you
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  Speaker 4: might not have those sort of super high rocketing up
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  Speaker 4: prices like you had a couple of weeks back, but equally,
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  Speaker 4: the risk of that hasn't necessarily gone away. If you
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  Speaker 4: have again drier conditions as we move through the rest
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  Speaker 4: of this year, and the hydro lakes sort of you know,
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  Speaker 4: we keep using the water and there's not quite as
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  Speaker 4: much that comes and replenishes it. If there's still that
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  Speaker 4: sort of gas issue that comes through, I think there's
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  Speaker 4: a lot of businesses that are probably going is this
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  Speaker 4: just one off? Or more realistically, how many more times
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  Speaker 4: might it come through? And can they last through? I mean,
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  Speaker 4: there are some big operators as well. Up in the
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  Speaker 4: far North. They already lost energy of course because the
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  Speaker 4: pylon fell over. So there's a lot I think that
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  Speaker 4: are probably going. Actually, the business operations are a lot
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  Speaker 4: more risky, a lot more costly, and of course that's
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  Speaker 4: got real implications for people, not only if they lose
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  Speaker 4: their job, but even just over the last couple of weeks,
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  Speaker 4: everyone who's been left in limbo. It's a really tough
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  Speaker 4: environment out there for a lot of people.
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  Speaker 2: Too, right it is, Hey, Brad, thank you very much,
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  Speaker 2: appreciate it. Brad Olson, infametric principle economists.
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