John Key recently claimed that the high dollar is a good thing, saying “For a lot of New Zealand consumers, their life’s actually a lot better because of the strong dollar.” This claim looks at only one part of the complex story of exchange rates which is harming our manufacturers and exporters, says the New Zealand Manufacturers and Exporters Association (NZMEA).
NZMEA Chief Executive John Walley says, “Recent research shows that import prices have relatively little impact on overall consumer prices. In any event, to consume much at all, you need a job, which will become more scarce as exporters close or move under the current pressure.”
“Although the high dollar does make imports cheaper, it is seriously hurting manufacturers and exporters, margins and competitiveness. This puts jobs at risk, and reduces the likelihood of reinvestment to improve productivity and employment.”
“Manufacturing is a relatively high wage sector, with higher median weekly incomes than the average for our economy. Wage rates tend to reflect labour productivity, margins and investment. Supporting investment in the manufacturing sector is the only way to sustain and improve real wages and living standards.”
“We cannot expect labour productivity to improve if policy settings starve margins and investment, slowing innovation and skill accumulation of our work force.”
“Our economy needs to operate in such a way that we can expect to build a strong export sector that will provide jobs and wealth in the long term, as a opposed to the short term overvalued exchange rate fools paradise.”
“Although a lower dollar may cause the price of imports to rise, there would be little identifiable impact overall on consumer price, as most New Zealand dollars spent relate to things that have costs in New Zealand dollars. We all visit the supermarket more often than the TV shop.”
“Research conducted by the Reserve Bank of Australia showed that a 10 per cent appreciation in the exchange rate translated to only a 1 per cent decrease in consumer prices over around three years.”