Exporters hurt as dollar stays high
The strengthening of the Kiwi dollar against the currencies of trading partners is not helping exporters, the New Zealand Manufacturers and Exporters Association says.
The association's latest survey of business conditions shows that export sales increased in October, but chief executive John Walley says the currency conditions are not helpful.
The survey, completed last month, shows total sales in October increased 14.82 per cent from the same month a year ago.
Export sales increased by 36.52 per cent, with domestic sales decreasing 4.96 per cent on October 2012.
"This month is generally more positive on last month, exports are up against a falling trend throughout 2013 and domestic sales have turned south against a positive trend since the middle of the year," Walley said.
"Our indexes have improved on last month, and staff numbers are continuing their small but positive trend.
"It is too early to tell whether this improvement in export sales will continue. Commentary is mixed and the depreciation of the Australian dollar and movements in the American dollar are not helping."
The kiwi has been trading at about five-year highs against the aussie.
That is partly a reflection of the relatively weaker Australian economy, which points to a potential rate cut by the Reserve Bank of Australia.
Reserve Bank of New Zealand governor Graeme Wheeler has signalled the next rate move will be higher in this country. Higher interest rates tend to attract investment in the currency.
Economists say the New Zealand central bank rate increase could be delayed till as late as June next year, rather than March.
The kiwi was trading around A90.66 cents today.
It has also been trading strongly against the greenback in recent months, and in early-afternoon trading was at US82.13c.
Walley said the survey sample this month covered $490 million in annualised sales, with an export content of 57 per cent.
Net confidence among surveyed firms rose to 18, up from the 0 result reported last month.
A net 27 per cent of firms reported an improvement in productivity for October.
Staff numbers for October increased year on year by 0.35 per cent.
Walley said there was a moderate staff shortage in each of the five areas they survey measured - operators-labourers, tradespeople, supervisors, professionals-scientists and managers.
"Other data has been showing general economic improvement, particularly for the domestic economy, and for exports this largely relates to commodities for China," Walley said.
"Non-commodity exports to other markets are a more difficult story. Market constraints are clear and competition is increasing as others, say from Europe, look to sell into Australia and other countries as Europe struggles."
The New Zealand economy was feeling good in parts, and exporters of more elaborate products might be feeling that things were not as bad as they had been, Walley said.
He hoped the introduction by the Reserve Bank of tougher limits on the amount banks can lend home buyers with low deposits would help keep a lid on asset price inflation.
This would allow the Reserve Bank to hold off on official cash rate rises, he said.
"The Reserve Bank of Australia has reiterated its contrasting stance to RBNZ, looking towards lowering their cash rate, while RBNZ still looks set to increase our OCR next year," he said.
"This difference will add to the further pressure on the cross-rate problem for exporters selling to Australia."