Weak US and 'basketcase' Europe driving dollar strength – Joyce

Steven Joyce: It’s getting pretty evil at the moment

Businesses must continue to “roll their sleeves up and work hard” to beat the strong kiwi dollar, economic development minister Steven Joyce says.

He blames the weakness of the US and European economies for driving this strength.

“It’s getting pretty evil at the moment," Mr Joyce told the launch of the Technology Investment Network’s "state of the nation" TIN 100 report into the high-tech and manufacturing sector.

"The actual money lenders don’t like those with large sovereign debt,” he says of the financial markets.

“The only way to bring down the New Zealand dollar is to do something serious, economically stupid and convince the world we are an economic basket case like Europe.

“As a country, if we don’t meet the challenge we will slip down as a low-wage, low-value economy." 

Mr Joyce says New Zealand is “living the dream” of its products “going up the value chain".

“It’s a tough exchange rate but what the world sees is the relative economic progress. Relative to the rest of the world, it’s a good news story in New Zealand,” he says.

“It’s tough. It’s not easy but there’s also fantastic opportunity.

“You want the central banks of the world to say you have a reasonable sensible government there.” 

Mr Joyce warned opposition policies to lower the dollar will only create inflation and hit people in the pocket. He expected the dollar would decline eventually, though he did not give specifics.

“We probably won’t settle at this higher level but it will be at a higher level than what it's been in the past.

“It’s going to stay higher than the fundamentals suggest. We are dealing with wider economic forces.

“We are dealing with a once in an 80 year redress in the US economy,” he says.

The European economy was also dealing with issues not seen since World War II.

Mr Joyce warns there will be no significant change to the global economy unless “the US changes”. It faces a “fiscal cliff” which its politicians must address.

“Once they have done that there’s a sense the economic spirit of the US will resume. It’s going to be really interesting.”

While the TIN 100 report says many businesses are suffering from a strong dollar, in a show of hands just one in five of the 100-plus present agreed.

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Bollocks Mr Joyce

We all know a drop of point 5 of a % or 1% will drop the currency and we will still have very competitive international interets rates to attract investment.

The new RBNZ Governor has already stated that he has room to move rates down.

Most Kiwi's are now saving and that has already come out in recent figures. Just because a few houses are siold in Auckland at inflated prices shouldn't mean the whole country - and in particular the export sector should be held to ransom.

We keep getting this Government led propoganda that the house prices could drive inflation. Sure the average house price is up in Auckland but how many houses are being sold - not very bloody many Mr Joyce - compared to the heady years.

Be honest Mr Joyce and get on with it and encourage your fellow Ministers to encourage the RBNZ Governor to lower the OCR.

Otherwise you are sounding like a fool.

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No we don't doctor, that's a fallacy in other than the very short-term (days/weeks). Look at the Australian example with rates cuts, withmore to come, and an exchange rate remaining at very high levels. Other factors are at play here, and it is very clear to the observant, rather than the repeatitive

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Stop telling us the NZ dollar is too high. It's below just about every country that isn't a basket case.

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“The only way to bring down the New Zealand dollar is to do something serious, economically stupid and convince the world we are an economic basket case like Europe."

True. I guess we could always vote for the Greens and Labour. That ought to do it.

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or we could stay with the status quo. They have as much vision as a possum in the headlights. Stand still and do nothing, or if you like - "roll up your sleeves!" Meanwhile the banks suck billions from the economy while the primary sectors - milk,meat, and mining- and their associated working class face job loss and restructuring. And all because our dollar is overvalued and less liquid, thanks to massive credit expansion throughout the world. There seems one obvious answer, and its not reducing interest rates, that just gives more money to the banks. I'll let you figure it out.

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Lowering the OCR would be a distaster.
Most houses listed in Auckland are sold within days or by a fierce bidding at inflated prices.
Most people who want the OCR reduced are property investors or people with a vested financial interest
Young people or potential first home buyers would never have a chance to buy if interest rates were reduced. Prices would increase much faster . Mortgage rate reductions would not compensate.

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Is anyone else tired hearing people moan about the exchange rate??
By lowering it, many more New Zealanders will be worse off as imported goods will go up - everyone already knows that - taking it one step further - pensioners with investments are already struggling with such a low return on thier term deposits etc.... lets penalise the generation who actually worked to make a living and savings so we can make it funding generations that do everything possible to avoid a good honest days work.

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Buy NZ made - problem solved.

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name me a country that the average person would wish to live in that has a long term low exchange rate? Give me the choice and I know I as a middle class nz'er where I would prefer to live my new midddle class life. sydney, stockholm, zurich, helsinki, munich, New York and so on. Anyone eager for life in Iran, Belarus, Zimbabwe, Albania, Vietnam or any number of other low exchange rate destinations by comparison?

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japan

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The only way we will benefit in the long term from a lower exchange rate is if NZers are prepared to accept a lower standard of living by not wanting wage increases to compensate for the increased price of all imported goods. I am waiting for Labour to tell their union supporters and NZ workers that they will not allow such compensating wage increases if they are in government.

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Enough already with this whining to lower interest rates. Interest rates are already set at emergency lows - if anything, given that we have reasonable growth rates they should go UP. Time to stop pandering to a small group of property fixated individuals demanding ever lower rates and consider the hundreds of thousands of savers being crucified by these low rates.

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"a small group of property fixated individuals" - don't you mean the majority of New Zealand!

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the majority of New Zealanders are property fixated individuals!

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A bit of commercial fairness, honesty, and integrity by the government would give the average Kiwi the confidence to believe that his efforts will be rewarded. At the moment hard work is a waste of time.
When a consultant, appointed by KiwiRail when Joyce was Minister of Rail, can shop government funded project tender prices for the benefit of government's "mates", why should anyone listen to Joyce's rhetoric.

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Lower exchange rate, lets see how those who are paid via the Govt welfare programs like paying higher prices for, petrol, flat screen TVs, clothing, shoes, all kitchen appliances, imported cars, the list is endless.

The Greens and Labour sit on the sidelines and bitch n moan but have no inkling of how their hand outs and managed exchange rate policies will affect us all.

Exporters of anything have to figure ways to produce or manufacture their products at lower costs or find ways to add value that the rest of the world are prepared to pay a premium for. There is no free lunch in business, hand outs to any sector (export subsidies, import quotas, $s for producing more children) all lead to market distortions and eventually significant pain for the recipient when the tap is turned off.

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I am with the "Doctor" Well the above clearly we have a seriously devided economy, those who consume and live in Auckland, and those that produce and export and live in the balance of the contry. The devide is becoming greater by the day, the former are only concerned about the cost of their 'new house' - total self interest. the former are the creaters of the goods that we export to survive. It is they that are suffering severlly undewr the economic cliimate, give Steven "spinner" Joyce his due on this one, for a Jaffa who actually now accepts it is tough.
When it is tough for the producer, rest assured it will be tough for the consumer in another 12 months when the lack of producer injected funds feeds starves the retaillers, the wholesalers and the product importers of funds with which to operate. And ultimately the Govt with seriously tax take for income and GST in particular.

that has always been the case - for 60 years of my life, however few in Jaffa land now comprend that "beware the ides of March" thats when the crunch will come

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I like the idea if I save hard to go somewhere in a developed country, I would like my NZ dollar to go as far as it possible can - so instead of paying NZD27 for a £9 train ticket which the maths was like not so long ago I pay NZD18 for it. Little bit left over for a cup of tea and a scoan! However, this is no good to those in NZ trying to compete with other markets through the benefit/advantage of a weak exchange rate. Surely the market place creates a medium.

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