Lower Kiwi dollar is not the total solution

Canterbury Manufacturers’ Association.
Media Release.
28 June 2006.

The Canterbury Manufacturers’ Association is warning that a lower Kiwi dollar is not the total solution in supporting an export-led recovery.

The Association says that the expected decline in the NZ dollar against the American, Australian and other currencies will be welcomed by exporters as a window of opportunity through which they can rebuild or acquire greater returns from offshore markets.

However the CMA questions how long this window will remain open and given the experience of the Kiwi dollar, the Association considers it is unrealistic to expect everyone who can to rush back into offshore markets.

Chief executive John Walley says that New Zealand must look beyond expanding household debt as a means of financing living standards and examine ways in which real growth of the NZ economy can be encouraged and supported.

“A fall in the dollar will immediately benefit those exporters who tolerated low and in some case no returns from trade with offshore markets, but for those who couldn't or wouldn't carry that risk it will take many months or perhaps years to rebuild those sales and some will never take on the risk of export sales again.” said Mr. Walley. “As the New Zealand dollar declines pressures in the economy shift and it might be good to be an exporter, and bad to be an importer for a while."

"However, if we want to see exports grow and trade balances improve we must see less volatility in the currency. Better policy in support of added value activity and lower risks in this segment of the economy." Mr. Walley says. "Government can do a good deal more to encourage this process that will result in real productive growth in New Zealand and with the right policies in place we might well see more companies better able to ride the cycle when it is bad to be an exporter and good to be an importer without blowing out the trade deficit to new and record highs.”

ENDS

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