PM says high kiwi dollar has benefits

While other countries like Japan manage their currencies lower, Prime Minister John Key says there are benefits to a strong exchange rate, even as it creates headaches for exporters.

In his state of the nation address in Auckland, he said prices for primary exports are holding up and the country's terms of trade remain high.

That is helping to support a high New Zealand dollar, which is proving a headwind for other exporters and firms that compete with imports, Mr Key says.

"But the flipside of a high dollar is that goods priced on world markets are cheaper than they otherwise would be," the former foreign exchange dealer said.

"This includes goods that are crucial to households like food, clothing and fuel."

The low prices are keeping inflation down and businesses are taking advantage of cheaper capital goods to invest in plant and machinery.

His comments come as BNZ economists predict that the New Zealand dollar will be strong for much of 2013.

The bank has an end-year target of 81.00 US cents, which compares with 83.65 cents in afternoon trading.

It says the liquidity being sprayed around by the big central banks around the world merely reinforces the fact that the New Zealand economy is in a better position.

BNZ forecasts the kiwi will fall to 74.00c by mid-2014 and 70.00 cents by mid-2015.

(BusinessDesk)

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16 Comments & Questions

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John, you know that is hogwash and most people do, too.

Anyone with half a brain will know that a lower currency with increased export revenue beats a country with a higher currency and exporters struggling any day.
NZ Inc won't prosper by buying new LCD TVs or new cars or by having cheaper petrol compared to higher export prices generating more cash into the economy and more jobs as manufacturers and exporters have more confidence to grow.

Nice try, but a poor response to your view on the high currency.

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That's why all the countries above us in the OECD ladder have spent the last 50 years devaluing their currencies, apparently making themselves richer by making themselves poorer and redistributing wealth from households to innefficient producers? Yeah right... Anyway, the value of the dollar is irrelevant, it needs to be adjusted by relative productivity.

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Cheaper petrol? Where can I get this?

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With comments like this, I just can't believe this guy is running our country. As an exporter, the continual high dollar is basically making it impossible to survive.

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Whether you think the NZ dollar is too high or too low depends on which side of the fence you are on Most of us benefit from a high dollar. There is no such thing as a wealthy country with a weak currency.

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Correct Ralph

But in our case our currency is overvalued and all we need is it to drop down to the mid to high 70's against the USD and your argument stands

At the moment we are overvalued
We don't need it undervalued either - just its true value

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The people buying NZDs for USD.8350 and higher seem to disagree....

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I would suggest that you review your business model as, if we can't produce (your) goods competitively in the world market, we should be focussing on the goods that we can. Ultimately, our exporters cannot rely on indirect subsidies from all consumers (including themselves) through an artificially lowered exchange rate.
I suspect that we would all get a surprise at the flow on costs to NZ society in general (including exporters' costs of purchase, funding and overheads) were the NZ dollar to fall out of bed tomorrow.

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Nah, I love a high NZD. Makes travelling o/seas much more cheaper, along with the costs I get charged when I buy from Amazon.com. Much more cheaper too. And remember: cars dont cost as much when our dollar is high', as with the petrol. All power to our dollar. Wont be fully happy till our bad boy boasts parity with his US cuzzie.

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Key has no answer so he is doing what he always does - bullsh*tting one and make it look like a silver lining - he has absolutely no idea what he is talking about.
AND never will.

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He's running the country all right,unfortunately into the ground!!!
Key really has no ideas, no vision, enjoys having power along with the motorcades.
Loves royalty, international travel, just hanging out for his knighthood.

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What stupid comments coming from bloggers on an NBR site of all things that I would have thought were better informed than anyone. No one gets rich with a weak currency. Rich countries generally always have strong currencies over time and their countrymen richer because of it.. Name me the countries with the "weak currencies" that you'd be happy with ? ......yeah thought not

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Where is jonkey at? the ultimate spinner?
cheap stuff is great, but in the end we still have to pay for it!!
with export dollars!!
that is the reality - sorry John the high dollar actually means:
the decimation of exporters (I give him his due he acknowledges this) however the collateral effect of that is less income for NZ Inc,
less manfacturing for export
= less employment for blue collar workers
= more unemployed
= higher gross benefits
= a greater tax requirement
how bright is that?
now there is an ancient country in Europe that once was great - that now is not serious in need of greece to get the wheels to turn.
we were great once - some believed jonkey was smart enough to make us great again - alas alack a false prophet

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Yeap little New Zealand just can not rely on poor nationalist views to adapt monetary policies to a global economy. It seems that GDP is in fact based on competitiveness not on political activism. The smarter or productive you work, the more value you create to exchange goods. If labor is not efficient it means that primary needs to kick in. Rich countries will balance currency fluctuation with output or raise money through asset sales or borrow...usually poor means borrowing. Key could have said that it is time to invest overseas at cheap international rates and high kiwi dollars which makes perfect sense. In the end tall poppy syndrome kills any chance of international wealth creation and only amplify local ignorance of the mass. High or low dollar does not really make a difference...same flow of cheap ideas to be repeated and very little strategic progress. Call it isolationism...but people kind of getting it only upon arrival in the big Oz, fortunately.

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Skeptical Observer , like to see you do a better job. All the people complaining here are all low rent whinges and moaners who expect everything to be done for them. Harden up.

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John is right. I think our currency needs to be stronger than it is - it is weaker than Australia, usa, uk, china by a long way - so when we travel or try to buy houses or any goods that all have global prices we are the "poor cousins". eg - you cannot buy a house if you are earning kiwi dollars as people you are competing with from other countries with higher currencies have a massive advantage. WAKE up people - it's now a global village- that's why meat costs so much here too.

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