The NZ Dollar is not high, nor bad!

Ex ASB 270707

I read an article out of Australia about their strong dollar last week. What struck me the most was how positive they are about it. The know commodity prices are up, they know they have growth and they know that they are stronger in the world market.

Compare that to the reaction in New Zealand. Exporters are screaming. Alan Bollard is driving our dollar up because of interest rates. When, oh please, will it come down?

Here are my issues with the way we view the dollar in New Zealand.

  • The NZ dollar is not overly strong. The US dollar is very weak. Compare these four graphs GBP vs USD, EUR vs USD, AUD vs USD and NZD vs USD. Notice any trend? Those who want the dollar to drop want us to become worse off against the Pound, Aussie and Euro!
  • We are missing all the positives. A weak USD means the US economy is weak, means we have more opportunity.
  • The positives of a strong dollar is cheaper imports. Fuel is 25c a litre cheaper than it would be if the dollar was around 60c against the US. Is this the real problem for the government and Bollard. Cheaper imports equals more spending?
  • The exporters (small ones) seem to be complaining about the dollar. We are never going to compete against China as a manufacture point for low value products. We need to build businesses herein NZ, that have supply chains elsewhere (like icebreaker).

I spoke to a couple of large exporters recently, they make high end, high value goods, they are hurting but for them it was part of the cycle of business and had more to do with hedging that the dollar. If you are selling to Aussie or Great Britain or Europe, even through the USD, the net result is not as bad as you would think by just looking at the NZD vs USD.

Finally, I don't claim to be an economist so don't take this all as gospel, and overall the tradeweighed index is up. But the graphs and Aussie attitude seem to speak for theselves.

Is it such a bad thing that we have a high dollar?

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