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English Says New Zealand Dollar Exchange Rate Still Too High

New Zealand Finance Minister Bill English
Bill English, New Zealand's finance minister and deputy prime minister, said the deficit would probably halve again this year, though reaching surplus ahead of schedule was unlikely. Photographer: Munshi Ahmed/Bloomberg

New Zealand Finance Minister Bill English said the nation’s currency remains too strong and is hampering exports.

“The exchange rate, in our view, is still too high,” English said in Wellington today after the Treasury published financial statements for the year through June. “It remains a headwind for the export sector.”

The local dollar has gained 7 percent against the greenback since Aug. 30 after the U.S. Federal Reserve refrained from tapering its stimulus. New Zealand’s currency is also being boosted by accelerating economic growth and the prospect of higher interest rates.

The New Zealand dollar was at 82.95 U.S cents at 4:08 p.m. in Wellington, from 82.99 cents before the financial statements were released.

English said if growth reaches 3.5 percent next year, as forecast by the Reserve Bank, “it would make New Zealand one of the fastest-growing economies” in the Organization for Economic Cooperation and Development. A booming housing market also poses a risk to exporters because that may drive up interest rates, he said.

New Zealand’s budget deficit is narrowing faster than forecast and English said the government remains on track to return to surplus in the year to June 2015.

The operating balance before gains and losses, known as OBEGAL, was a deficit of NZ$4.4 billion ($3.7 billion) in the 2013 fiscal year. That’s down from a NZ$9.2 billion deficit in 2012 and the 2013 budget forecast for a NZ$6.3 billion shortfall.

English said the deficit would probably halve again this year, though reaching surplus ahead of schedule was unlikely.

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