Horowhenua Chronicle: The New Zealand Dollar
The performance of the economy affects us all in some way. Right now our dollar is soaring against the United States dollar and whilst it has dipped in the last week, it may again push back above US80 cents?
A high dollar makes it more expensive to export product from our shores and cheaper for imports coming into New Zealand.
The Labour Government has been blaming anyone and everything ranging from the housing market to the dairy industry (despite dairy farmers not realising the payout increase until August 2008) for driving up inflation due to increased spending.
Reserve Bank Governor Alan Bollard lifted the official cash rate by 0.25% up to 8.25% last week, which has the effect of increasing interest rates. This puts more pressure on people with floating mortgages and those coming off their fixed term. New rates are likely to be around 10% and, with more than 30% of home loans predicted to be re-fixed within the next 12 months, many household budgets will come under considerable strain.
Bollard has one blunt instrument to temper inflation and that is lifting the official cash rate which in turn increases interest rates and encourages overseas investors (attracted by high interest rates) in the New Zealand dollar – thus keeping the dollar high.
Labour has tried to sheet some of the blame away from its poor economic management by announcing an inquiry into monetary policy through a parliamentary select committee where it hopes a bipartisan approach to solving inflation and runaway property prices will be reached.
Locally we have some great exporting companies and recently I visited the Levin Meats processing plant employing around 260 staff and exporting 82% of its beef in US dollars. General Manager Phil Grey told me that “strong currency conditions have undermined returns for Levin”. This company supported by Te Runanga O Raukawa puts about $8 million of wages per year into the local economy which is great, but the economic spin-offs for our local community would be even greater if our dollar wasn’t so high against the US dollar.
As I visit many local businesses, like Levana and Silverdale, these manufacturers tell me the high dollar is hurting them – on top of crippling compliance costs. The Government’s slogan this year is ‘the year of the exporter’. It might read better as one of Tui’s advertising billboards ‘2007 year of the exporter, yeah right’.
National will get the long term economic policies right and concentrate on growing the economy without causing inflation. Rampant growth in Government spending needs to be reigned in and refocused. National will provide an environment that businesses will want to invest in and incentives that get New Zealanders ahead.