Media statement Wednesday, July 18th, 2007

Exchange rate savaging exporters; income halved

The New Zealand dollar has reached critical levels for many exporters.

Profit margins have been eliminated. Many are merely hanging on in the hope the overvalued dollar will retreat before they have to give up hard won positions in offshore markets.

"The companies already reported to be cutting production locally such as Click Clack, F&P, Sleepyhead, GL Bowron, Skellerup, Dynamic Controls and Masport and are just the tip of the iceberg," said Alasdair Thompson, chief executive of the Employers & Manufacturers Association (Northern).

"Many others are sourcing more of their components and raw materials partly made up, with less value add being done in New Zealand.

"Imports are taking an ever rising proportion of the local market as our ability to add value

"Imports of industrial supplies (up 15 per cent in the year to March) have been increasing far faster than local production (up 3.6 per cent).

"The monthly and quarterly data for manufactured exports in May were negative across most categories; since then returns have shrunk further as the dollar rose.

"From June last year the NZ dollar has risen 30 per cent against the US currency, representing a third less revenues for exporters.

"Over the past six years to July 2007 the loss in revenue in NZD terms is 49.36 per cent or about half what they were getting in July 2001. (In July 2001 the NZD bought US40 cents).

"Over that time fuel and compliance costs have also risen dramatically for business.

"But there's no evidence by central or local government action to reduce their costs. The opposite applies; central and local government charges, rates and taxes are running up to four times the rate of inflation.

"Government needs to do less hand wringing and offer more constructive support and leadership over the crippling impacts of the currency."

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