Consumers and the retail sector are set to be the big losers as the New Zealand dollar slumps.
It has hit five-and-a-half year lows, pushing up the cost of imported goods.
The weakening kiwi will be good news for manufacturing exporters and the agriculture sector, sapped by the strength and volatility of the kiwi during the past two years. The expected world recession, however, is already eroding demand.
The kiwi hit US54.35c on overnight trading on Monday and slumped marginally further before retracing some losses to stand at US54.77c at 5pm yesterday.
ASB chief economist Nick Tuffley predicted the kiwi would be trading above US55c by about Christmas, remain in the low 50s during the first half of the year, then approach US60c during the second half of 2009.
"What's it going to do right now? No-one knows," he said.
BNZ chief economist Craig Ebert predicted the kiwi would remain lower, and for longer, than Mr Tuffley; trading about US50c in mid-2009 and rebounding US2c by the end of the year.
The low dollar would be good for the agriculture sector, but while raw material prices for metal and oil were falling, anyone having to import items such as fertiliser, machinery and equipment faced increasing costs.
Mr Tuffley said there were some positives for New Zealand consumers, with recent tax cuts and a drop in fuel prices by about 20%. Households' discretionary spending , however, remained under pressure.
"There will be some retailers, with margins already under pressure, who will struggle to survive," he said.
Mr Tuffley said importers had been doing well while the kiwi was high, which was reflected in competitive prices for consumers, but their already tight margins would come under further pressure.
At the least, this would see present retail prices held or increased slightly for consumers. Lower prices might not be passed on to the consumer from technology gains, expected when the latest models of electronic equipment were released.
