27 Jan 2014

Strong NZ dollar having spin-off effect

9:48 pm on 27 January 2014

The soaring New Zealand dollar will have some effect on business but it should not be major, spokespeople for two top-earning sectors of the economy say.

The Tourism Industry Association and Export New Zealand say there will be an impact as the strong dollar means tourists pay more to come here, while exporters get less for their products overseas.

New Zealand dollar.

Photo: AFP

The kiwi has been strong for some time and on Monday reached an eight-year high of 95.31 Australian cents.

Tourism Industry Association policy and research manager Simon Wallace said Australian arrival numbers increased over the year to November by 5 percent and early figures this year show that growth continuing.

Tourists were still coming despite the higher dollar, although they may spend a little less while they were here, Mr Wallace said.

Export New Zealand executive director Catherine Beard said the high dollar meant it was a challenge for exporters to be competitive, but they had a range of strategies to cope, including increasing productivity.

"It is challenging. Obviously, the higher the New Zealand dollar goes, the bigger struggle it is to be competitive ... But exporters have been increasingly taking measures to deal with it. The number one thing they mentioned was improving their productivity."

The dollar could stay high for some time because of New Zealand's economic growth in comparison with other countries, she said.

But New Zealand Winegrowers Association chair Steve Green said he was hoping its high ride was an aberration and it would come down to its more traditional level of about 85 Australian cents before the situation really started to hurt the industry.

Winegrowers were feeling the pressure as the continued strength of the New Zealand dollar affects their profitability in their biggest export market, Australia.

Firms had been adjusting their profit margins and absorbing the loss but could eventually have to raise their prices if the dollar stayed high, which would affect demand and upset the dynamics of the market, Mr Green said.