28 Aug 2014

Dollar likely to fall further

9:42 am on 28 August 2014

The New Zealand dollar is expected to drop further from recent highs, bringing relief to hard-hit exporters.

The currency has belatedly starting falling following increasing signs New Zealand's fast growing economy is slowing, losing about 5 cents since hitting US88 cents last month.

While dairy prices have fallen back about 40 percent since peaking in February, the dollar has lost about 5.5 percent in the past month.

dairy farmer with cows

Dairy prices have dropped since February but the dollar has only just started falling. Photo: PHOTO NZ

Farmers and manufacturers say many have already taken steps to tighten their budgets to minimise the impact of the high dollar, although some want the Government to do more by managing the currency.

High-tech entrepreneur Selwyn Pellett said the Government should manage the currency to help exporters and help build a high-growth, high-wage economy.

"What do the exporters do? They bring in new money into the country, they pay the wages, that money goes round the economy, and over time it doesn't matter that your T V set costs thirty percent more or twenty percent more because you're employed and you can afford to buy it."

Skope Industries exports 80 percent of its chillers and freezers to the slowing Australian economy. Managing director Guy Stewart says recent falls in the kiwi have helped but it was not enough to reverse the huge appreciation in the dollar against its Australian counterpart.

"The increase in the New Zealand and Australian cross-rate of around ten, twelve percent just takes us from being in a competitive position to being in a struggling position in terms of its tearing money clean off the bottom line."

The currency is expected to fall closer to US80 cents in the short term, but economists say the resumption of interest-rate rises could make its fall temporary.