High Dollar is Having a Negative Effect

24 July 2007

High Dollar is Having a Negative Effect on the Export Sector

Unsurprisingly, as the New Zealand dollar breaks through US81 cents, the exchange rate is the number one issue of concern to businesses, according to initial analysis of a Wellington Regional Chamber of Commerce survey that has been running today.

“The dollar’s appreciation is having a negative affect on the export sector”, said Chamber CEO Charles Finny.

“We urge Parliament’s Finance and Expenditure’s Committee to consider the currency’s appreciation as part of its inquiry into the monetary policy framework.

“In our submission to the committee, we said that in order to take pressure off the appreciating exchange rate, the government must address the policy settings which the Reserve Bank has to lean against to control inflation and implement policies which support monetary policy.

“Number one on the list is the escalating growth in government expenditure. Government must take steps to slow this growth immediately.

“The New Zealand dollar is significantly overvalued against most currencies and we hope that those who have been investing in the dollar to take advantage of our excessively high interest rates realise the risk they are taking.

“The differential between our interest rates and those in other OECD economies is small relative to the likely depreciation. In contrast the risks are enormous.

“People speculating on the New Zealand dollar or chasing our high interest rates should take care”, Mr Finny concluded.

ENDS

© Scoop Media