April 19 (Bloomberg) -- New Zealand's government is happy the nation's currency has declined, said Jim Sutton, minister for trade negotiations. A lower dollar may spur returns for exporters.

The New Zealand dollar has fallen 7.6 percent this year against the U.S. dollar, making it the worst performer of the world's most-traded currencies, according to Bloomberg data. The currency bought 63.15 U.S. cents at 12:30 p.m. in Wellington. It rose to a record 74.66 U.S. cents in March last year, which was the highest since it began trading freely in 1985.

The nation's currency has dropped ``at last,'' Sutton said in an interview in Tokyo. ``The government is happy enough with the current level. What we would like to see is maximum stability, minimum surprises.''

The $97 billion economy contracted for the first time in more than five years in the fourth quarter of 2005 as the record- high currency crimped exports. The economy shrank 0.1 percent in the quarter from the previous three months, the government said in March. Exports, such as dairy products, meat and wool, make up 30 percent of the economy.

``It is a problem being a small economy, there tends to be an element of volatility about the value of our currency,'' Sutton said.

He also said the New Zealand government is optimistic it may reach a free-trade agreement with China by the end of this year. China's Premier Wen Jiabao was in Wellington this month for talks with New Zealand Prime Minister Helen Clark.

Free-Trade Deal

Jiabao said an agreement could be completed within two years and may be the first such accord with a western developed country, New Zealand Press Association reported on April 6.

``It could be done in one year from now,'' Sutton said. Wen ``was actually referring to the total time taken for the negotiating -- one year has gone, one year to go. It is a perfectly realistic ambition to try to get it done by the end of this year.''

Wen said talks had run into difficulties relating to agriculture and services, though obstacles could be overcome if ministers paid careful attention, according to the New Zealand Press Association report.

``The difficulties are not major,'' Sutton said. ``Many farmers in the world don't want to see extra competition in their domestic market, and governments tend to be protective of that.''

Wen ``was just signaling that, like our other negotiating partners, they want to make sure that their farmers are not damaged. We are happy to go along with that.''

China is New Zealand's fourth-largest trading partner taking NZ$3.25 billion ($2.1 billion) of exports in the year to February, or about 11 percent of overseas sales.

``We are already developing some close working relationships particularly in the dairy sector,'' he said.

To contact the reporter for this story: Victoria Batchelor in Sydney at vbatchelor@bloomberg.net.

Last Updated: April 18, 2006 21:14 EDT