Media statement Tuesday, December 6th, 2005
Higher the dollar goes, the bigger the crash to come
The expectation that interest rates will go up again this week has driven the kiwi dollar to record highs and will
exacerbate the harsh times ahead for our exporters and the economy, the Employers Association (Northern) says.
“We fear the landing for the economy will be all the harder as interest rates keep rising,” said Alasdair Thompson,
EMA’s chief executive.
“There is no doubt New Zealanders have been living wildly beyond our means, and gone deeply into debt to do so. But we
ask: ‘Has the end date arrived for the spend up? Do we really need further interest rate rises? How much does the
Reserve Bank want exporters to pay and the economy ultimately to convulse?
“To earn offshore as much as we’re spending on imports we need to increase the value of our exports of traded goods by
at least 25 per cent in current values and a lot more besides to service debt and other invisibles.
“But growth in export earnings has effectively stalled.
“However imports of traded goods for the year ended October went up 8% to reach nearly $37 billion whereas total traded
exports rose just 1% to $29.4 billion.
“We are already paying heavily for maintaining our lifestyle and about to pay more.
“The cost of our indebtedness - the interest rate - is already the highest in the developed world.
“Our debt from mortgages is rising twice as fast as our incomes, rising 16 per cent in the last 12 months.
“We owe on average about 30 per cent more than our annual incomes.
“We will pay for our imports binge through:
- higher interest rates
- higher costs for imported goods
- higher inflation
- unemployment and bankruptcies as businesses fail to adjust.
“Our spend up, and lack of savings and investment are about to catch up with us and cut our standard of living.”
ENDS