Towards a balanced economy
During the economic depression of the early 1930s, prices for New Zealand’s primary products plunged. Income and employment in industry were not so badly affected. The depression emphasised the vulnerability of the New Zealand economy’s narrow commodity base, and politicians recognised the need for a balanced economy – one in which industry complemented agriculture.
Politicians and bureaucrats
Bill Sutch, head of the Department of Trade and Industry from 1958 to 1965, was described by Minister of Trade (later Prime Minister) Jack Marshall as ‘in a class by himself: highly intelligent, very able, positive, imaginative, enthusiastic, dogmatic, arrogant, provocative, controversial, devious, politically suspect and not to be trusted.’1 Sutch was an ‘economic nationalist’, who believed strongly in the importance of developing New Zealand industry and retaining ownership of it.
Development of New Zealand industry would reduce British manufacturers’ access to the New Zealand market. New Zealand needed to maintain unrestricted access to the British market, which bought 80% of the country’s exports in the early 1930s. Through talks at the empire economic conference in Ottawa in 1932 and New Zealand’s 1933 tariff review, British business lobbied to keep opportunities for ‘reasonable competition’ in the New Zealand market.
Labour and import substitution
The Labour government which took office at the end of 1935 was aware of the need to keep access to markets in Britain, but was also determined to develop local industry. Legislation was passed to encourage new industries and concentrate plant, equipment and expertise in existing industries. Industrial planning was also undertaken.
The Industrial Efficiency Act 1936 controlled entry to industries producing goods such as cement, tyres, and pulp and paper. The Iron and Steel Act 1937 provided for a state-owned iron and steel industry, seen as fundamental to industrial development. In 1939 the government began planning the use of the maturing state-owned and private plantation forests.
A balance-of-payments crisis in 1938 led to a further step. Imports were restricted and became subject to licensing. British opposition led to provisions favouring imports from the UK. Manufacturers were not expected to export, but were encouraged to produce goods that would otherwise be imported. It was much easier to get a licence to import raw materials and plant than to import finished goods, and manufacturers also had a protected market in which to sell their output. In this way manufacturing overcame the limitations of plant, firm and market size. Licensing promoted industrialisation and provided employment.
When coupled with the restrictions caused by the Second World War, the result was a manufacturing boom. Many existing businesses expanded, and new ones were set up to take advantage of gaps in the market.
Import substitution in action
When their supply of imported washing machines and refrigerators abruptly dried up in early 1939, Woolf Fisher and Maurice Paykel approached Auckland manufacturers to see what could be done. Mason and Porter, makers of Masport lawn mowers, agreed to make motors, and packaging company Alex Harvey and Sons said it would make the cabinets. Fisher & Paykel Ltd was transformed from an importer to a successful manufacturer.
Manufacture of building materials, two-way radios, knitwear, crockery, chemicals and home appliances, and food processing, all began or expanded while protected from competition.
Post-war rebuilding and development
After the Second World War, the government helped industry rebuild and then develop. Materials in short supply were sought out by trade commissioners and politicians, and imports of raw materials and equipment were a high priority in the allocation of overseas funds. The Department of Industries and Commerce set up an information service for manufacturers, and, with the Department of Scientific and Industrial Research (DSIR), began issuing a technical advisory bulletin.
Industrial zones were created in or near new housing areas in the Hutt Valley, Porirua and Auckland. Manufacturers of corrugated cardboard, motor bodies, joinery and toys leased areas in Tāmaki, Auckland; steel fabricating and galvanising workshops, production machine shops and a chemical factory opened in Hutt Park Road, Lower Hutt.
Research and development
The government also directly undertook or funded scientific and industrial research. In 1945 the DSIR set up an industrial development laboratory. Work relevant to industry continued to be done in its other labs. By the late 1950s research on fertiliser, leather and shoes, pottery and ceramics, wool, meat and dairy was also taking place in joint government–industry research associations, and in universities.
During and after the Second World War, industrial development was held back by a labour shortage. In the post-war years, the government set up immigration programmes focused on both skilled and unskilled workers, and encouraged married women to join the workforce.
The timber industry
After the war ended, local and central government upgraded roading and provided housing and port facilities for the central North Island pulp-and-paper industry. The industry included private sector companies, such as New Zealand Forest Products, and a mixed public–private company, Tasman Pulp and Paper.