The New Zealand Manufacturers and Exporters Association is calling for action on the exchange rate, saying it has cost exporters $10.4 billion over the past three and a half years.
In February 2009 the NZ Dollar bottomed out at 52.3 on the Trade Weighted Index (TWI), but since then currency manipulation overseas and inaction in New Zealand have seen the NZ Dollar TWI rise to 72.9 in August. For every one percent the currency rises it costs New Zealand exporters approximately $200 million on an annual basis. Between February 2009 and August this year the NZ Dollar rose by 20.6 percent, and it has averaged 14.8 percent above the February level over the last three and a half years.
NZMEA Chief Executive John Walley says, “It is no wonder that we are seeing job losses in coal and aluminium with a statistic like this. To put this in perspective New Zealand’s total annual merchandise exports are around $45 billion, so this is a hugely significant number compared to the margin on those sales.”
“Claims that nothing can be done to manage the exchange rate impact are only true in the context of our chosen macroeconomic framework – there are alternatives. Witness the international evidence from countries such as Switzerland, the United Kingdom and the United States, that efforts to control exchange rates can and do work.” . . .
There is no doubt that a high exchange makes it difficult for exporters because it makes their goods and services more expensive.
But does the NZMEA’s calculations take into account the high exchange rate also makes imports cheaper and some of those – like fuel and machinery – have helped reduce costs of production.
That might not have offset the lower returns as a result of the higher dollar but does the $10.4 billion taken any account of it at all?
Various factors impact on the exchange rate. One of these is debt which is why the government is committed to returning to surplus as soon as possible.
But the main reason our exchange rate is so high is because the United States’ dollar is so low we are far to small to have an impact on that.
Labour thinks we could start playing with currency again. Someone should tell ‘em they’re dreamin’.