Upside to high $

The New Zealand dollar hit a post-float high of  82.62 US cents yesterday.

That makes exports traded in US currency more expensive but it also makes imports cheaper and the NZIER says it will help keep inflation down.

Inflationary pressures are building because businesses have seen their margins slimmed down and will want to recoup some ground when the economy picks up pace – likely to begin in 2012 as the rebuild of Christchurch gains pace, according to the institute Quarterly Predictions report.

“The RBNZ will need to raise rates next year towards 4% to offset these inflationary pressures,” NZIER principal economist Shamubeel Eaqub said in a statement. “A high NZD is helping to keep a lid on inflation for now. We expect the NZD to remain elevated for some time,” he said.

 Beef + Lamb New Zealand’s (B+LNZ) Economic Service’s report on movements in sheep and beef input prices showed a 4.1% increase in the year to the end of March this year, in contrast to a 2.9% decrease the previous year.

The increase has been driven by the price of fertiliser, fuel and increases in banking interest rates, says B+LNZ Economic Service Executive Director, Rob Davison.

 “The price rises for fertiliser and interest have a big impact given they are the largest areas of expenditure on sheep and beef farms.

If the higher dollar helps keep the price of fertiliser down and keeps a rein on inflation which in turn reduces the need for interest rate rises it will compensate for the currency’s impact on export prices.

Normally when the dollar is high farmers complain. There’s hardly been a whimper this time, and nor should there be. Commodity prices are still holding up and the higher dollar takes the pressure off the price of inputs like fuel, fertiliser and machinery.

The Fieldays open in a couple of weeks. They’re a barometer for farming confidence and exhibitors will be expecting to make good sales.

4 Responses to Upside to high $

  1. gravedodger says:

    Now, retired with a fixed income, well sort of, the strong NZ$ is my friend, however I do remember the total frustration at how the dollar climbed annually as the Lamb schedule dropped with the pressure on export companies acquiring the currency to finance their marketing, only to watch it fall again when the fertilizer was to be applied in the Autumn.
    As to your mention of “Field-days”, ahh Mystery Creek, now there’s a compelling case for Global warming. Some of the most hypothermic times of my life in farming were at that great expo on the banks of The Waikato with the freezing scotch mist enveloping one with not a bloody dramm of the nectar of the Highlands to hand to stoke the inner fires under the multiple layers of wool, the mandatory Dry-as-a Bone oilskin coat, the Akubra rabbit fur hat and the Gortex ski gloves.

  2. bulaman says:

    I used to take machines to show at Mistry creek. Caught my last dose of Pneumonia there in fact! Waste of money as an exhibitor (in my experience) unless you’re selling fibreglass cattle prods or other cheap(?) crap. The “buyers” were already buying but get a discount if it can be announced at the pissing contest that is Misty crick..

  3. mort says:

    good time to be buying gold. Perhaps Billy boy should borrow $600 per week and stick half of it into gold. When the USD shits itself when the Chinese refuses to write bonds in USD, the gold will be worth twice as much, and hey presto, all the debt is gone.

  4. Richard says:

    Another perspective from Bernard Hickey
    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10729374
    This time about Kiwibank- bit of a warning here.

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