NZ dollar tipped to reach US90c
The New Zealand dollar is being tipped to go to an unprecedented US90 cents, putting increased pressure on jobs in the export and manufacturing sectors.
The kiwi's rise to US84.5c came just days after 192 redundancies at Summit Wool Spinners in Oamaru. More jobs will be lost or moved offshore if it moves higher, an industry leader says.
Manufacturers, particularly those exporting to North America, become less competitive as the currency climbs in value against the greenback. But a broader section of New Zealand often benefits from a strong exchange rate. Imported petrol is cheaper, as are other items that New Zealanders rely on, including medicine and computers.
Importers Institute secretary Daniel Silva said New Zealanders bought imports in larger volumes when their currency was high because prices were lower.
But Manufacturers and Exporters Association chief executive John Walley said that manufacturers, for example Canterbury-based Hamilton Jet, lost profitability on offshore sales as the currency increased in value.
Also, domestic manufacturers found it tougher to compete with the price of imports.
"Ultimately it has to be bad for New Zealand because the activity will either cease here [for example] Summit, or will go offshore, [for example] Fisher & Paykel Appliances. The higher the currency, the more likely it will happen."
The price of the currency remains well above its long-term average of about US80c. Now one economist is picking the kiwi to go above US90c this year. Another is picking US87c as a peak.
BNZ economist Tony Alexander predicted the kiwi would top 90c before the end of the year as the Reserve Bank got closer to tightening monetary policy by raising the official cash rate.
ASB chief economist Nick Tuffley said this year the kiwi was likely to remain "stubbornly elevated" and could climb towards US87c during the year. "The pain . . . is concentrated on that small proportion of our manufacturing export base that exports to the US."
ANZ chief economist Cameron Bagrie said the kiwi was probably around "the top of the range".