OCR Cut Adds Pressure To An Already-Soft Kiwi Dollar - What Travellers Need To Know

"While the rate cut is welcome news for those with mortgages, the picture is a little less clear for the strength of the New Zealand dollar and its impact on Kiwi travellers. As the New Zealand central bank has been cutting more quickly than most other countries, this is a major factor in the comparative weakness of our dollar when compared to other major currencies.

To put this in context, over the past year, the NZD has now lost around 12% against the Euro, which impacts the cost of almost everything, spanning hotels, flights, and everyday attractions. And although the NZD has lost a more modest 2% against the USD over the same period, it’s still down almost 20% if we zoom out over the past five years.

As today’s news was already priced in for the most part, the immediate impact has been modest, and the NZ dollar has strengthened slightly against the Euro and USD. But the central bank has left the door open for further cuts next year, which means the currency’s relative weakness could continue and it’s likely to take some time before it recovers.

That said, there are some places that could offer more bang for your buck — at least in the short term. If you have your sights set on Goa or the Taj Mahal, you’re in luck, with the New Zealand dollar seeing a slight gain on the Indian Rupee over the past year. Kiwis are also getting more from their dollars in Vietnam and Indonesia, increasing the appeal of these countries as budget friendly options.

And despite the Japanese Yen strengthening slightly against the New Zealand dollar this year (around 1%), Kiwis are still getting a good deal by historical standards, with the NZD being up over 20% when compared to the Yen over the past five years.

We’re already seeing how this plays out in real behaviour. Stats NZ’s latest numbers shows travellers gravitating toward destinations where their dollar holds its ground, and easing off the ones where it doesn’t. Currency isn’t the whole story, but it appears to be shaping their destination choices — with Japan, Indonesia and Vietnam seeing a significant uptick in tourism.

For anyone that has their sights set on a trip to Europe, there are ways you can make your New Zealand dollars stretch further. One easy win, no matter where you’re travelling, is ensuring that you avoid hidden fees in exchange rate markups that often come when using your bank issued credit or debit cards, while also avoiding expensive currency exchange kiosks in airports.” - Tristan Daikin, Australia and New Zealand Country Manager at Wise

More info on Stats NZ data referenced:

Stats NZ’s latest release shows outbound travel surging. NZ-resident departures hit 315,478 in September, up 16% year-on-year. But where people are going is shifting:

• Asia is booming - Japan (+44% for the month), China (+20%), Vietnam (+26% year-ended), Thailand (+15%), Indonesia (+12.8%).
• Longer-haul Western markets are softening - the US is down 1.4% for the month and visiting-friends-and-relatives travel to the US fell 8.2%.

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