Time running out for bargain-hunters

20:16, Aug 05 2014

If you've got money to spare then now is a great time to be a consumer.

The New Zealand dollar is near record highs against many currencies, meaning many of the things we love to spend money on have never been cheaper. But the good times may be about to run out.

In recent times our strong economy and rising interest rates have helped the dollar rise quicker than one of the New Zealand mountain bikers tackling a steep slope.

But experts are now predicting our dollar will weaken over the next year or two.

The dollar is currently at US85c but Westpac is predicting it will average US83c for the rest of the year, and, after a brief bounce, it will continue its decline next year.

According to Westpac currency guru Imre Speizer, the big factor likely to push our dollar down in the next couple of years will be the "normalisation" of near-zero interest rates in some of our major trading partners.

In the currency world's version of a handicap race, the New Zealand dollar is starting out ahead. But other economies, particularly Australia and the US, are expected to raise their rates at a faster pace even if they don't overtake us.

Long story short: Good imported from overseas will become more expensive. And there's always a chance the kiwi could have a bigger fall than expected.

Let's not forget it plunged to under US50c in 2009 as a result of a little event called the "global financial crisis".

Will there be another shock this time, like a global Ebola outbreak or an All Blacks loss at next year's Rugby World Cup? No-one knows, hence why they're called "shocks".

With that in mind, here are five things that will get more expensive if the dollar declines:

1. Overseas travel:

The strength of the dollar means now is a great time to take a holiday beyond these shores.

Many New Zealanders have figured this out, as evidenced by the number of overseas trips increasing by 9 per cent year-on-year in May and 3 per cent in June.

But some destinations are more attractive than others, due to bigger gains in the respective exchange rates.

For instance, the kiwi is up 9 per cent against the US dollar this year but flat against the British pound.

This has made Hawaii a new hot spot for Kiwi travellers, according to Simon McKearney, general manager of product for Flight Centre NZ.

"That's a destination that's done better than Bali. We've had a 35 per cent increase in bookings to Hawaii," he said.

"It's considerably cheaper than it used to be due to our strength against the US dollar. You can get return flights for sub-$1000 and it's a relatively short flight at only eight hours."

Just in case you're staring at the screen thinking that's a misprint, here is proof of the heretofore mythical sub-$1000 return flight to John Key's favourite holiday spot.

2. Online shopping:

According to market research firm Nielsen, New Zealanders spend about $1.3 billion on online overseas purchases per year".

The kiwi dollar's strength has been a boon for online shopping addicts, who can buy from overseas without having to get out of their pyjamas or leave the comfort of their living room.

Retail analyst Victoria Harris of Milford Asset Management says price has played a part in the growing popularity of online purchases, along with other factors such as the range of products and convenience.

"It's not like a light switch where if the dollar falls people will stop spending, but maybe they'll think twice and they might take the time to see if it's in the store down the road."

What can you buy online? Pretty much anything you want.

Imported cars:

New Zealanders still love buying cars, although statistics suggest we aren't driving them as much as we used to.

Last year 113,000 new vehicles were registered last year, the highest number in nearly 30 years.

And according to the Best Selling Cars Blog, this year has been even better for new car sales, with registrations in the year to June up 14 per cent on the same period in 2013.

While the strong economy and lower unemployment have undoubtedly helped to give consumers more confidence, the strength of the dollar has lowered the cost of imported cars and made new cars more attainable for those who love depreciation.

The statistics also show smaller cars are becoming increasingly popular, as they offer motorbike-like fuel economy without the need to wear a rain jacket and helmet while riding.

One car that is small in size, fuel consumption and price is an old favourite, the Mitsubishi Mirage. Once New Zealand's most popular car, a new model can be had for under $20,000.

Electronics and whiteware:

When it comes to big ticket items like fridges and TVs, people often wait until a time when the price is right and they can afford them.

That time is right now, according to Harris who said there had been "huge price deflation" in TVs over the past couple of years.

"If it's been something you've been thinking about for a while I think it looks quite attractive. You've got brand new ones coming in for the price of a second-hand one a couple of years ago.

There's a 32 inch TV for under $400. It's a sign of the times that 32 inches seems rather compact, but you can always move your couch closer if it's too small for your 60-inch tastes.


Petrol is another consumer staple that will get more expensive if the dollar declines, but dealing with the expected price rises is more of a challenge

While you can buy a rush in now and buy a cheap TV or book an overseas holiday before prices increase, buying 10,000l of unleaded 91 petrol and storing it in a giant tank is not a practical option for most people.

One option for spending less on petrol is - wait for it - driving less. Walk, take public transport, Skype your in-laws rather than driving to meet them (probably a good option anyway).

Another option is buying a more fuel-efficient car. Owners of turbocharged V8s should take a deep breath before checking the comparisons.