Currency Killing Exports

3 February 2012

Currency Killing Exports

Wool exporters are becoming increasingly frustrated with the strength and volatility of the NZD.

Exporters President Mr John Dawson said today that the sustained high exchange rates against those of New Zealand's major trading partners is costing the New Zealand economy very dearly and that at the level of individual industries, such as wool, real damage to the long term viability of our export markets is starting to become evident.

Mr Dawson said that after a number of years of very poor market conditions, wool has seen an upswing in demand ahead of competing fibres and because of that wool prices have recovered to good levels.

"The improved demand for wool coincided with a general lift in all fibre prices and wool was able to maintain its traditional premium but in a higher overall price bracket. Most other fibre prices have slipped back already but the renewed demand for wool is preventing too much slippage.

"However, with the NZD at such crazy levels our wool is hugely expensive in USD, GBP, Euro and AUD terms. Not only does that make our wool uncompetitive against wool from other countries, it creates a huge gap between our wool and the many competing fibres. Processors really don't have an option but to move away from our wool and to use either cheaper wool or more likely, alternative fibres."

"New Zealand farmers and exporters are seeing the gains made in the world price of wool swallowed up by the massively over-valued NZD, while wool farmers in other countries are enjoying the best returns for many years."

"The NZD has climbed over 73 percent against the USD in the past three years and although it has come back a bit in recent times, it is on a relentless climb back towards that level. Our other main trading currencies have followed a similar pattern.

"That is money straight out of the farmer's pocket. Firstly, it artificially depresses the prices farmers get relative to the real world market and secondly, the cost to our customers is just too different to what they can pay for other wool - or worse - other fibres."

Mr Dawson said that New Zealand's overall economy and GDP did not warrant the demand for our dollar. The RBNZ does not seem to be concerned about the level of our currency any more. Currency speculators are having a field day proven by the fact that the New Zealand dollar is one of the most traded currencies in the world.

"As much as any other country in the world, New Zealand relies on exports to survive."

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