Weak US and 'basketcase' Europe driving dollar strength – Joyce
"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."Featured comment
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.
"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.
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.