Export growth ignored again

29 April

The Reserve Bank must do better than comments like “the elevated level of the New Zealand dollar is unwelcome” from Governor Dr Alan Bollard yesterday. The Government and its officials cannot claim to support an export led recovery while resisting reform of monetary and fiscal policy that continues to exacerbate the single biggest problem impacting exporters say the New Zealand Manufacturers and Exporters Association (NZMEA).

NZMEA Chief Executive John Walley says, “There are a number of exporters who cannot survive if the dollar stays around the eighty US cent mark for a sustained period of time.”

“These are exporters we badly need producing value added, differentiated products that have a sustainable future at sensible long run average exchange rates.”

“These are the firms that should be leading the export recovery, but our macroeconomic policy is driving them out of business instead.”

Exports by level of processing 2010 (NZD)
Unprocessed Primary Products Processed Primary Products Simply Transformed Manufactures Elaborately Transformed Manufactures Miscellaneous, Unclassified and Confidential Trade
$14.1 billion $15.9 billion $4.1 billion $7.2 billion $2.2 billion

“There has been some talk that rising commodity prices justify a rise in the dollar,” says Mr Walley. “As the table shows, most of New Zealand’s exports are not the unprocessed commodities that might fundamentally justify higher exchange rates. Export growth in the processed primary and manufacturing sectors require investment in product development, new plant and equipment to improve capacity. A high and volatile currency will increase the uncertainty of return, pushing back against export focused investment.”

“It is worth noting that the annual bilateral trade is worth about as much as a single day’s trade in the New Zealand dollar – exchange rates have little to do with trade in the real economy.”

“An economy that barely missed a double-dip recession and has been hit by an earthquake does not justify a high currency. The only reason currency pressures persist is that other countries are taking action to lower their exchange rates, whether through quantitative easing in the United States and the United Kingdom, capital controls in Canada and Brazil or direct currency management in China and Singapore, while our policy makers sit on their hands.”

Peter Hume, NZMEA Media Liaison

ENDS

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