Strong dollar drives sales

NIKO KLOETEN
Last updated 05:00 11/07/2014

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The high New Zealand dollar is a boon for shoppers, who are taking advantage of lower prices to buy more gadgets and upgrade to better models.

The kiwi was trading at above US88 cents for most of yesterday, hitting a high of US88.35c, just short of its post-float high of US88.42c back in 2011.

The recent strength of the dollar is translating to bargains for those buying imported electronics and white-ware, according to Noel Leeming's executive general manager merchandise, Jason Bell.

"It's such a competitive market that any price reduction achieved by our suppliers is passed straight through to consumers."

Bell said most product categories had seen increased unit sales at lower prices, such as tablets, which are up 52 per cent on a year ago with average prices 21 per cent lower.

"People will buy a tablet then get a lot of accessories with the money they've got left over. They're still spending to budget but getting more bang for their buck."

But Bell said some categories had seen their average sale prices increase, such as cameras (up 13 per cent) and fridges.

This was because the drop in prices meant consumers were able to upgrade to better models than they had expected to be able to afford, he said.

"People will come in with a budget in mind for an appliance they want to buy and then find if they spend an extra $200 they can go up a spec," he said.

"It might be they come in looking at a single-door fridge and find they can get a double-door fridge for a bit more."

But for the retailers themselves, the high dollar is not a guarantee of higher profits.

Retail analyst Victoria Harris of Milford Asset Management said gains in the dollar could hurt the profits of companies that made a large proportion of their sales overseas, when their earnings are converted back to New Zealand dollars.

Although bargains are to be had, Harris said overall retail spending figures showed consumers were not splurging like they did in the boom days leading up to the global financial crisis.

"We haven't seen a huge rush. It's more of an economy where, if you are confident about your job and future, you are going to be spending."

Life may get even better for shoppers enjoying the electronics bargains, with the dollar widely expected to break the post-float record against the US in the next few days.

But Bank of New Zealand currency strategist Raiko Shareef said financial markets are wary that further gains could prompt the Reserve Bank to take action.

"Should we push up to US89c it means the Reserve Bank may take the foot off the interest-rate pedal," he said.

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