High Dollar Whacks Exporters

16 April 2007

High Dollar Whacks Exporters

The New Zealand economy is at serious risk from the continued rise in the kiwi dollar, said Keith Kelly, chair of the meat and fibre section of Federated Farmers.

"Sheep farmers in particular are being crucified by the high value of the New Zealand dollar, which broke through 74 U.S. cents today and is poised to set a 23 year high. Meanwhile there are signs that interest rates will go higher next week, putting more upward pressure on the currency.

"I have been warning for months that many New Zealand sheep farms are becoming financially unviable, and have stopped spending until returns improve.

"The economy is becoming seriously unbalanced if sheep farming, one of New Zealand's biggest export industries, is not profitable, and interest rates and the exchange rate are likely heading higher.

"If farmers are not profitable they are not paying taxes. Agriculture is New Zealand's single largest industry and when it is not paying taxes, that means all New Zealanders miss out.

"The high kiwi dollar has been hurting farmers by reducing returns they get from their produce. To make matters worse the squeeze on returns has come at a very difficult time following three years of sustained increases in farm expenses, most notably for fuel, electricity, local government rates, labour and compliance costs. Farmers are price takers and they have little ability to pass on cost increases to the consumer.

"Sheep farmers are fed up with words and want action. They would like to see the Reserve Bank and the government find some new ways to curb inflation because the current system is not working.

"As a start the government could do its bit to lower inflation by reining in its core spending. Over the past five years total Crown expenses have increased from $44.2 billion to $65.1 billion, a 47% increase.

"The government must also take a serious look at compliance costs linked to persistent high-cost areas such as the Resource Management Act, ACC, and the Holidays Act. Meanwhile councils must make more effort to reduce the ratepayer burden on landowners, many of whom are paying rates for services they do not receive."

Mr Kelly is chair of the NZ Meat and Fibre Producers Council, an industry group of Federated Farmers of New Zealand.

ENDS

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