28 September 2000 Media Statement

Mixed impact of value of dollar

The value of the dollar is not some kind of national virility index, and its present level will have a mixed impact, Deputy Prime Minister Jim Anderton told a Rotary audience in Nelson today.

He pointed out that the New Zealand dollar is at a higher level against the Australian dollar today than it was at when the dollar was floated in 1985. Then it bought around 65 cents Australian, compared to about 74 cents now.

"No one would seriously argue that the New Zealand economy has outperformed the Australian economy over the last fifteen years."

The mixed impact of a lower exchange rate overall should include more exports.

"That is something we absolutely have to do. The current account deficit makes it crucial for us to sell more of our goods and services overseas."

Acknowledging that some supermarket prices would rise, Jim Anderton said those rises needed to be put in some perspective.

" New Zealand imported $29.912 billion in the year to August 2000. That amounted to about 29% of our GDP. If the imported goods rose in price by (say) 5%, then that could equate to an increase at the supermarket of as little as $1.45 for every $100 spent at the check-out – and that's if it stayed in place for a full year.

"But what is even more important is that goods and services produced in New Zealand will become cheaper. At the supermarket, it means that New Zealanders will increasingly buy New Zealand made products.

"I saw an item on television recently claiming that supermarket prices are going to rise – and it showed imported cheeses to illustrate the point. I'm not sure that many New Zealand families think of French camembert as a staple of the family diet. But the reality is that the price of New Zealand made cheeses don't have to rise.

"In other words – if the price of French camembert is going up, then you can still buy New Zealand-made camembert. And that will create more jobs and rising incomes for New Zealanders."

ENDS

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