Currency remains uncomfortably high

Currency remains uncomfortably high

- 17 February

While the New Zealand Dollar (NZD) has fallen back from record highs, it remains uncomfortably high for manufacturers and exporters, particularly against the Australian Dollar (AUD), say the New Zealand Manufacturers and Exporters Association (NZMEA).

NZMEA Chief Executive Dieter Adam says, “Manufacturers and exporters have been pleased to see the currency fall back, but there is still a way to go. The NZD has reacted somewhat to today’s fall in dairy prices against some currencies, but has risen against the AUD. In recent months our currency has been failing to fall significantly, in spite of a series of dairy price decreases, reductions in our interest rates and an (albeit minor) increase in US interest rates. Unlike in similar situations of global uncertainty in the past, our dollar has also failed to respond to the recent negative sentiment and falls in equity prices globally.

“Australia is one of our most significant trading partners, and is our largest export market for mechanical machinery and equipment. Against the Australian dollar, our currency has trended upwards since 2011, where it sat in the low 0.70's.

“Staying at the 0.94c – 0.92c range against the AUD is putting pressure on our manufacturers ability to be competitive and get the margins needed to re-invest in their businesses. Manufacturers need to invest in R&D, equipment, expanding markets and employees skills to grow and stay competitive into the future.

“Manufacturers will be watching the Reserve Bank of New Zealand’s (RBNZ) next OCR decision and corresponding comments on the currency, for which they have continued to point to as uncomfortably high for some time. Inflation and inflation expectations remain low despite recent OCR cuts – we may need to start looking seriously at ways to give the RBNZ more tools and targets, to better balance outcomes for inflation, employment, growth and our currency, in a new global economic environment.

“We need the automatic stabilisers to work. A sustained overvalued currency really does affect the competiveness and success of our manufacturers and exporters over time. Successful economies are built and grow on a foundation of successful manufacturers to add value, provide export income, innovation, technical skills and well-paid employment.”

ENDS

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