7 Apr 2015

Weak Aussie dollar 'could cause job losses'

7:37 pm on 7 April 2015

Factory jobs are predicted to go and wool and meat exporters will likely face tougher competition if the Australian dollar remains weak.

Exporters to Australia would have felt some relief this afternoon when the kiwi fell after the Reserve Bank of Australia decided to leave its cash rate on hold at at 2.25 percent.

The currency market's reaction was swift, causing the New Zealand dollar to fall sharply by almost one cent against the Australian.

A short time ago the kiwi was buying around 98 Australian cents, after reaching near parity yesterday.

However, the market still expected the New Zealand dollar to achieve parity sooner than later, as the RBA is looking for a lower exchange rate to stimulate the economy across the Tasman.

President of the Manufacturers and Exporters Association Tom Thomson said jobs would go if the kiwi remained high, as manufacturers cut costs to remain competitive in Australia.

"If you are exporting in Australian Dollars that means you need around about a 25 percent price increase.

"For those of us in the market we know how hard that is to get, you are now putting yourself up against Australian exporters who now have a much bigger advantage against us."

He said that would probably mean some severe cost-cutting within the sector and in some cases job losses.

Kerry MacDonald from the Australia New Zealand Business Council also said a rising kiwi exposed a fundamentally more vulnerable New Zealand economy.

"So the strong dollar discourages tourists, it discourages investment in export earning industry and overall, in a difficult to quantify way - but a quite fundamental way, it makes the New Zealand economy weaker."

One of the country's largest fishing companies Sanford said the New Zealand dollar's strength against its Australian counterpart would only have a relatively small impact on the company.

Sanford's chief operating officer Greg Johansson said the company had spread its risk around.

"Australia is obviously a significant market but it's not our only market, so i guess it's spreading your customer base around to spread the risks and exposure you have to a single currency."

Another large exporter Fisher and Paykel Healthcare also said the impact of the dollar's strength would be minimal, but if more of its sales were in Australia that would be different.

The company said Australia currently made up nearly 5 percent of its total revenue.

President of Federated Farmers William Rolleston said wool and meat exporters may also see tougher competition from their Australian rivals.

The Aussie has also fallen against the US dollar, which meant Australian companies could afford to drop prices of their exports.

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