Account deficit illustrates exporters pain

27 June 2008.

Account deficit illustrates exporters pain

The New Zealand Manufacturers and Exporters Association (NZMEA) says the current account deficit of $2.16 billion for the March quarter demonstrates the damage monetary policy has done to New Zealand’s tradeable sector.

Statistics New Zealand has released March quarter figures showing that the deficit is worse than expected. This news has prompted a drop in the dollar continuing the downward trend following this months RBNZ comment, foreshadowing some improvement for exporters.

Interest rates supported a net capital inflow of $2 billion, holding up the dollar in the March quarter. The trade deficit increased $1.08 billion from the same time last year, showing the continued affect of that capital inflow and the resulting higher dollar for longer on our exporters.

NZMEA Chief Executive John Walley says, “The numbers demonstrate the adverse impact this long cycle has had on the tradeable sector. Currently the exchange rate is improving for exporters but it is too late to claw back the likes of Fisher and Paykel who are already on their way offshore. Why hang on to policies that exacerbate long run cyclic changes in the value of the New Zealand dollar make life unnecessarily difficult for exporters?”

“In the face of this volatility, few will take the risk to build export businesses inflating the trade balance deficit which is ultimately unsustainable.”

“For the exporters the use of the OCR resist inflation has been problematic. Unless we implement new ways to deal with our domestic inflation problem, history will continue to repeat itself, and each time round we will end up with even fewer exporters,” says Mr. Walley.

NZMEA – the independent voice for manufacturers and exporters.

ENDS

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