Exporters call for relief from overvalued New Zealand dollar

Thousands of New Zealand jobs could be lost if the government and the central bank fail to take action to lower the country's overvalued dollar, the New Zealand Manufacturers and Exporters Association (NZMEA) warned Wednesday.
The New Zealand dollar has hit record highs against the Australian dollar and the Euro, and its overvaluation and high volatility is damaging manufacturers and exporters, NZMEA chief executive John Walley said.
"The Reserve Bank of New Zealand (RBNZ) continues to express concern, like a broken record, around the 'unjustified and unsustainable' level of our currency, but there has yet to be any real action to address the issue," Walley said in a statement.
He also criticized the government for its lack of empathy for the export sector despite its long-standing goal of increasing exports.
"While businesses can hold on for a time under difficult conditions as an overvalued and volatile exchange rate eats away at margins, this can't go on forever deferred investment from low returns damages future competitiveness, innovation, employment and their ability to operate successfully from New Zealand," he said.
"To put this in perspective, in the past week I have heard from two very different manufacturers who are considering the relocation of operations offshore due to the chronic currency problem. This represents nearly 1,000 good jobs we just can't afford to lose."
He said the expansion of macro-prudential intervention offered a solution to the RBNZ's dilemma of being stuck between an overvalued currency and inflating house prices.
The RBNZ could cut its official cash rate standing at 3.5 percent this year if inflation remained low and the RBNZ and the government took more measures to slow house price inflation.
"This could bring our interest rates closer in line with the rest of the developed world and put our tradable sector in a better position to thrive with a more balanced exchange rate," he said.
The NZMEA was pleased to see the RBNZ considering a new asset class for residential investment mortgages, both to better reflect their risk, which was higher than owner-occupied mortgages, and to prepare for the potential introduction of macro-prudential tools.
Analysts say inflation is expected to track below the RBNZ's 1- percent to 3-percent target range this year, but the central bank has said it will take a neutral stance on interest rates as house prices in the biggest city of Auckland continue to soar.