English Says New Zealand Positioned to Grow as Kiwi DropsTracy Withers
New Zealand’s economy is well positioned to benefit from any drop in the kiwi dollar which would bolster the profitability of exporters, Finance Minister Bill English said.
“The high 70s against the U.S. would be comfortable for us,” English told Bloomberg Television in Singapore. “Our exporters have dealt with the headwind of a pretty high cross rate over the last four or five years, in the mid 80s. They have shown themselves to be resilient. What we need to see now though is profitability in our export sector.”
New Zealand’s currency has gained 2.9 percent the past three months, pressuring exports which make up about 30 percent of the economy. English is betting that gradual reduction in stimulus by Federal Reserve policy makers will raise U.S. interest rates and help the kiwi decline, regardless of expectations that New Zealand central bank Governor Graeme Wheeler will start to raise borrowing costs next year.
“A fair bit of that effect is priced in, and we look forward to further positive developments as the Federal Reserve continues to unwind,” English said. “We’re in a pretty good position to benefit from any relaxation of pressure on the Kiwi exchange rate.”
The New Zealand dollar gained 0.2 percent to 82.24 U.S cents at 2:20 p.m. in Wellington. The currency was little changed after a report today showed the nation’s current account deficit narrowed more than expected to 4.3 percent of gross domestic product in the 12 months through June.
Wheeler on Sept. 12 said he expects to keep the official cash rate at a record-low 2.5 percent this year, adding that increases in borrowing costs will likely be needed in 2014 as economic growth accelerates and inflation pressures build.
Annual growth may rise to 3.5 percent by mid-2014, the central bank said in its monetary policy statement last week. A report tomorrow will show growth in the year through June 2013 was 2.3 percent, according to the median forecast of 10 economists in a Bloomberg News survey.
The central bank last week forecast exports will be unchanged in the year through March 2014 and will increase 1.6 percent the following year.
English is meeting with senior Singapore government officials following a visit to Vietnam this week, where he met leaders including Prime Minister Nguyen Tan Dung to discuss future trade ties.