Currency damages exporters

25 March

Currency damages exporters

The high New Zealand Dollar continues to hurt our exporters and import competing producers; continued high levels are not sustainable, say the New Zealand Manufacturers and Exporters Association (NZMEA).

NZMEA Chief Executive John Walley says, “We have seen record highs against the AU$ and Euro, while the TWI remains close to highs felt last year, despite some relief against the US$ - overvaluation and high volatility damages manufacturers and exporters.”

“The Reserve Bank of New Zealand (RBNZ) continues to express concern, like a broken record, around the ‘unjustified and unsustainable’ level of our currency, but there has yet to be any real action to address the issue. Bill English was also reported saying the high dollar was a ‘headwind for exporters’ saying 'it does create a bit of pressure in the short run for our exporters’ but overall there is little empathy for the export sector from Government, despite their long-standing goal to increase exports.”

“While businesses can hold on for a time under difficult conditions as an overvalued and volatile exchange rate eats away at margins, this can’t go on forever - deferred investment from low returns damages future competitiveness, innovation, employment and their ability to operate successfully from New Zealand.”

“To put this in perspective, in the past week I have heard from two very different manufacturers who are considering the relocation of operations offshore due to the chronic currency problem. This represents nearly 1000 good jobs we just can’t afford to lose.”

“The RBNZ needs to find a way out from between the rock of inflating house prices and the hard place of an overvalued currency; the expansion of macro-prudential intervention offers a solution.”

“We are still of the view that there is room for the RBNZ to cut the OCR this year if inflation remains low and more measures are taken to slow house price inflation, by both Government and the RBNZ. This could bring our interest rates closer in line with the rest of the developed world and put our tradable sector in a better position to thrive with a more balanced exchange rate.”

“We are pleased to see the RBNZ consult on creating a new asset class for residential investment mortgages, both to better reflect their risk, which is higher than owner-occupied mortgages, and to prepare for the potential introduction of macro-prudential tools.”

ends

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