Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Kiwi dollar 'significant headwind' for economy, Wheeler says

Kiwi dollar 'significant headwind' for economy, RBNZ's Wheeler says

By Paul McBeth

Dec. 6 (BusinessDesk) - The persistent strength of the New Zealand dollar has been a "significant headwind" to the economy as it erodes export earnings and encourages local consumers to buy foreign-made goods, according to Reserve Bank governor Graeme Wheeler.

The Reserve Bank has raised its forecasts for the currency over the coming two years, as international money markets chase yields in a low interest rate environment and as major central banks around the world - including the US Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan - print money in a last-ditch bid to stoke economic growth.

"The high New Zealand dollar continues to be a significant headwind, restricting export earnings and encouraging demands for imports," Wheeler said in Wellington.

The bank sees the kiwi dollar holding above 73 on a trade-weighted basis until December 2013, and falling to 71.40 in early 2015.It previously saw the TWI falling below 72 next year, sliding to 68.6 by March 2015.

The kiwi dollar climbed to 82.76 US cents after this morning’s monetary policy statement, from 82.49 cents immediately before. The trade-weighted index rose to 73.86 from 73.62.

The central bank said the strength in the kiwi dollar has discouraged foreigners from visiting New Zealand by eroding their spending power and has added to the woes in the local manufacturing sector by reducing their price competitiveness.

At the same time, it has encouraged locals to "obtain greater quantities of imported goods and services without spending more of the incomes on imports," leaving New Zealand producers out in the cold.

Still, the currency's strength hasn't been all bad, with the bank saying it has contained tradeable inflation and aided some exporters into Australia who have purchased their goods elsewhere.

"The strong New Zealand dollar has also meant that interest rates are lower than would otherwise be the case," the bank said.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Land & Water Forum: Fourth Report On Water Management

The Land and Water Forum (LWF) today published its fourth report, outlining 60 new consensus recommendations for how New Zealand should improve its management of fresh water and calling on the Government to urgently adopt all of its recommendations from earlier reports. More>>



Welcome Home: Record High Migration Stokes 41-Year High Population Growth

New Zealand annual net migration hit a new high in October as more people arrived from than departed for Australia for the first time in more than 20 years. More>>


Citizens' Advice Bureau: Report Shows Desperate Housing Situation Throughout NZ

CAB's in-depth analysis of over 2000 client enquiries about emergency accommodation shows vulnerable families, pregnant women and children living in cars and garages, even after seeking assistance from the Ministry of Social Development and Housing New Zealand. More>>


Speaking For The Bees: Greens Call For Neonicotinoid Pesticide Ban

The National Government should ban the use of controversial pesticides called neonicotinoids after evidence has revealed that even at low doses they cause harm to bee populations, the Green Party said today. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news