Wednesday, May 24, 2006
Talking down the New Zealand peso
A couple of thoughts on the New Zealand Dollar
1/ Are we the only country in the world which so consistently tries to talk down its currency?
2/ In other countries, a strong currency is interpreted as a symbol of national strength. In Canada, the rise of the dollar from lows of around US$0.62 in 2002 to US$0.91 today, has been greeted as a sign of a strengthening economy, signalling the strengthening ability of Canada to compete with the US.
3/ Even in December, when the NZ peso was buying around $0.95 Australian (as opposed to $0.82 now) it was still among the lowest valued currencies in the developed world. Lower than the Euro, the US Dollar, the Canadian Dollar, etc. I think it was on par with the Singaporean dollar, however. And it was "horrendously over-valued" at that time?? I feel a Tui billboard coming on.
4/ The benefits of the lower dollar are dubious: two stories have caught my eye of late. The first negative comment about the lower dollar that I saw was along the lines of "windpower turbines now too expensive with lower dollar: gummint must do something". Today, I heard a story about a fishing company which had improved revenues from the lower dollar wiped out by increased fuel costs.
5/ Fuel costs: wtf? Why should every NZer be punished for a low-dollar strategy, just so that farmers (primarily) can increase their revenues?
6/ There are "export" sectors other than farming - such as tertiary education, for example - where the dollar seems to make relatively little difference when compared with other, international factors. This said, I do wonder if we might do more to attract US tertiary students:
"New Zealand Universities are cheaper than most US schools, even when you're paying foreign fees! Plus a Bachelor's degree is quick and easy - over in 3 years, not 4-5 like in the US!"
7/ Servicing foreign debt becomes more expensive, along with practically every good and service.
8/ Most NZers are neither farmers nor manufacturers of goods for export. They work in the service and government sectors. For them, a lower dollar really means more expensive fuel, more expensive holidays, and savings that are increasingly worthless in international terms. Nice one.
1/ Are we the only country in the world which so consistently tries to talk down its currency?
2/ In other countries, a strong currency is interpreted as a symbol of national strength. In Canada, the rise of the dollar from lows of around US$0.62 in 2002 to US$0.91 today, has been greeted as a sign of a strengthening economy, signalling the strengthening ability of Canada to compete with the US.
3/ Even in December, when the NZ peso was buying around $0.95 Australian (as opposed to $0.82 now) it was still among the lowest valued currencies in the developed world. Lower than the Euro, the US Dollar, the Canadian Dollar, etc. I think it was on par with the Singaporean dollar, however. And it was "horrendously over-valued" at that time?? I feel a Tui billboard coming on.
4/ The benefits of the lower dollar are dubious: two stories have caught my eye of late. The first negative comment about the lower dollar that I saw was along the lines of "windpower turbines now too expensive with lower dollar: gummint must do something". Today, I heard a story about a fishing company which had improved revenues from the lower dollar wiped out by increased fuel costs.
5/ Fuel costs: wtf? Why should every NZer be punished for a low-dollar strategy, just so that farmers (primarily) can increase their revenues?
6/ There are "export" sectors other than farming - such as tertiary education, for example - where the dollar seems to make relatively little difference when compared with other, international factors. This said, I do wonder if we might do more to attract US tertiary students:
"New Zealand Universities are cheaper than most US schools, even when you're paying foreign fees! Plus a Bachelor's degree is quick and easy - over in 3 years, not 4-5 like in the US!"
7/ Servicing foreign debt becomes more expensive, along with practically every good and service.
8/ Most NZers are neither farmers nor manufacturers of goods for export. They work in the service and government sectors. For them, a lower dollar really means more expensive fuel, more expensive holidays, and savings that are increasingly worthless in international terms. Nice one.
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