Exporters appear to be in for another tough year as the New
Zealand dollar surged past US84c this week, with an economist
picking rates above US80c for most of the year. The exchange
rate was above US80c for 75% of 2012, and never closed below
US75c, BNZ currency strategist Mike Jones said.
Since December 31, the kiwi had gained more than US2c and
yesterday pushed through to US84.5c on opening.
''The New Zealand and United States dollar exchange rate
didn't eclipse 2011's US88.4 post-float high, but in terms of
persistent strength, 2012 was the strongest year ever,'' Mr
He said any dips this year below US80c were expected to be
''short-lived'', as several fundamentals were supporting the
kiwi; the ''grinding'' New Zealand economic recovery
continuing, commodity prices trending higher and the global
economy now being ''past the worst''.
''Our forecasts have the New Zealand and United States dollar
exchange rate holding above US80c for all of 2013, with US81
expected for the year end,'' he said.
The stubborn strength of the kiwi has been undermining
overseas receipts for exporters, squeezing already tight
margins, but at the same time assists consumers in delivering
cheaper imported items.
Long-time critic of Government and Reserve Bank monetary
policy, John Walley, of the New Zealand Manufacturers and
Exporters Association, ''entirely agreed'' with
Mr Jones' US80c-plus prediction, saying the scenario posed
''two outcomes'' for New Zealand exporters.
''They will be gone; either gone and close shop, or gone
offshore,'' Mr Walley said. His preferred model, to rein in
the persistently high kiwi, was the Swiss example where in
August 2011 they printed more Swiss francs and purchased
euros, to contain the strength of the franc.
''The Swiss policy appears to have worked,'' he said.
He highlighted that bringing down the kiwi's value would be
consumers, but a choice had to be made on ''cheap consumer
items, or having jobs in the export sector''.
Exporters with ''options'', such as software, high-precision
engineering, or those adding higher value to products, would
be forced to consider taking some or all operations overseas,
Mr Walley predicted.
ASB economist Jane Turner, in reporting the $700 million
trade balance deficit earlier this week, said she expected to
see some improvement in export conditions over 2013, with an
improvement in meat and dairy prices and a recovery in demand
from Australia and the US. ''Nonetheless, conditions for
exporters are likely to remain challenging, with the recovery
in global demand likely to be only modest and the elevated
New Zealand dollar continuing as a headwind,'' she said in a