AUDNZD - Five Year Lows

[kiora]

On balance lower dollar from memory lifted the rural economies though.I still remember the 80's when the rural economy was really sick.Once the Lange govt took over,$ crashed but the rural economy was humming within 2 years.Maybe too simplistic and one part of the economy but things go in cycles and I wonder if/when it will be the time for the rural economy to lift(apart from apples,honey,wine that are doing well).Its certainly been a long stretch in the doldrums but few things last forever.

[JBmurc]

Kiora...Do not wish for a lower NZ$, it may come true...It may seem nice for an Exporter on paper, but in reality it ain't..

Really well the factory we supply with our export product it does ,, the NZD/AUD has a huge affect on my take home pay as I'm paid on a percent of the gross sale price less fixed costs...the difference is huge ...a 80c to 95c is a basic drop of 20-25% of my income...and I'm sure many others would be affected likewise

[Hoop]

Kiora...Do not wish for a lower NZ$, it may come true...It may seem nice for an Exporter on paper, but in reality it ain't..

Really well the factory we supply with our export product it does ,, the NZD/AUD has a huge affect on my take home pay as I'm paid on a percent of the gross sale price less fixed costs...the difference is huge ...a 80c to 95c is a basic drop of 20-25% of my income...and I'm sure many others would be affected likewise

A drop in currency value is a Short Term Fix only JB ..Theory says over the long term a persistent low currency ...is not good to most of us..It makes for a drop in competitiveness, produce becomes less attractive to buyers (quality/price) unemployment increases..This could result in a downward currency value spiral.. Overall I don't think that scenario would be great for your exporting business or your pay packet ...eh?


Anyway..what percent of the working population,as yourself, get a pay rise every time the NZ dollar drops...1 % , 2%, ..?...A drop in currency is a "swings and roundabouts" "Rob Peter to pay Paul" type scenarios ..The counter-argument with a drop in currency is how many lose their jobs at the importing end?... .

I reckon over time (the long term) a high currency is far far better for everyone than a low currency...So why is it that everyone is brainwashed into thinking a Country should have to keep dropping their currency to perform.. The logic is wrong.. its short sighted thinking....and when Central Banks start acting this way it creates destructive currency wars.

Still Don't believe me... OK..
I googled this website economics made simple..

quote..."
Long Term Factors

In the long term, a country may boost productivity and competitiveness, this would create jobs and increase demand for exports. This would also help reduce unemployment and strengthen the exchange rate.
High unemployment may be caused by a lack of competitiveness which reduces the value of the exchange rate over time.

[winner69]

This is a good article. A bit of Rodney touting for business but a good read

Why the forex market is smarter than the Reserve Bank

http://www.sra.co.nz/pdf/SmartForexJul16.pdf

Governor Wheeler has spent almost the last two years trying to talk the exchange rate down. His comments and actions may have played a part in it falling for a period. However, since September last year the exchange rate has appreciated 12% contrary to the governor's continued calls for it to fall more in response to the falls in export prices and especially dairy farm incomes; despite him backing up his calls with OCR cuts. History is full of examples of the forex market, for all its shortcomings, being smarter than Reserve Bank governors and I don't expect things to be different this time around as discussed in this Raving. In our monthly forex reports I have been predicting upside in the exchange rate, with the upside being aided rather than hindered by the five OCR cuts the governor has delivered.

[JBmurc]

A drop in currency value is a Short Term Fix only JB ..Over the long term a persistant low currency reduces export quantities over time due to less competiveness and production...less work comes in for exporters and you are eventually made redundant..
Anyway..what percent of the working population get a pay rise every time the NZ dollar drops...1 % , 2%, ..?...Often when the NZ drops severely enough as in your example(95c to 80c) you and many others your profession would get a great pay rise but I would reckon more numbers in other professions would lose their jobs entirely and the unemployment rate rises...At 94c it cant be all that bad JB it sounds like you still have a job .

I reckon over time (the long term) a high currency is far far better for everyone than a low currency...So why is it that everyone is brainwashed into thinking a Country should have a drop in currency to perform better and make everyones assets suddenly of less value?? The logic is wrong.. its short sighted thinking.

Still Don't beleive me... OK..
I googled this website economics made simple..

quote..."
Long Term Factors

In the long term, a country may boost productivity and competitiveness, this would create jobs and increase demand for exports. This would also help reduce unemployment and strengthen the exchange rate.
High unemployment may be caused by a lack of competitiveness which reduces the value of the exchange rate over time.

A high NZD is great for NZ consumers that's for sure and the retail/importing businesses that benefit ...and foreign borrowers ....a long term high NZD only enlarges these debts >> and directs more employment into these import /consumer lead industries

We of course can paper over the issues of low paying retail/tourism/consumer jobs by keeping the door open for me consumers to come and live here ...


Fact-
New Zealand was such an efficient farming nation,
and the demand from Britain for food so great, that for
decades New Zealand – Britain’s farm in the South
Pacific, as it was often called – enjoyed one of the
highest standards of living in the world.....and why was this because we had huge export demand and high paying export jobs and low debt in housing ....the present NZ is going the other direction ...debt fueled property bubbles , huge increase in jobs for





--Just look at many of the Export focused nations- Japan,China in their Currency wars, also known as competitive devaluations, is a condition in international affairs where countries seek to gain a trade advantage over other countries by causing the exchange rate of their currency to fall in relation to other currencies....

[Hoop]

A high NZD is great for NZ consumers that's for sure and the retail/importing businesses that benefit ...and foreign borrowers ....a long term high NZD only enlarges these debts >> and directs more employment into these import /consumer lead industries

We of course can paper over the issues of low paying retail/tourism/consumer jobs by keeping the door open for me consumers to come and live here ...


Fact-
New Zealand was such an efficient farming nation,
and the demand from Britain for food so great, that for
decades New Zealand – Britain’s farm in the South
Pacific, as it was often called – enjoyed one of the
highest standards of living in the world.....and why was this because we had huge export demand and high paying export jobs and low debt in housing ....the present NZ is going the other direction ...debt fueled property bubbles , huge increase in jobs for





--Just look at many of the Export focused nations- Japan,China in their Currency wars, also known as competitive devaluations, is a condition in international affairs where countries seek to gain a trade advantage over other countries by causing the exchange rate of their currency to fall in relation to other currencies....

JB... Strange quote of fact to support your low currency argument

Fact-
New Zealand was such an efficient farming nation,
and the demand from Britain for food so great, that for
decades New Zealand – Britain’s farm in the South
Pacific, as it was often called – enjoyed one of the
highest standards of living in the world.....and why was this because we had huge export demand and high paying export jobs and low debt in housing ....the present NZ is going the other direction ...debt fueled property bubbles , huge increase in jobs for
Did you know that the NZ pound was a very high valued currency back then it was pegged to the British Pound and then to the US Dollar yep..The NZ currency fell in tandem with our standard of living with the Bretton Woods event and from the 1960's onwards our currency slowly devalued with the falling peg... The data I found by 1967 the new much lower decimal currency NZ$1 was = US$1.47 now its US$0.71..Unfortunately the currency figures for NZ as with all NZ business data is very hard to find..but I do know this from 1960 onwards the regulated NZ currency was lowering in value (but still far too high) and so was our standard of living together with a persistent faltering economy. Britain no longer guaranteed to buy all our produce exposed NZ as very vulnerable country to market forces (competitiveness) and as our own Market competitiveness was very low it reflected in our lowering currency..Regulated currency being propped up was far too overvalued for a Country heading toward a banana republic status

Did you know that Britain bought our Butter back in 1947 for 1s 6p that is equilivant to NZ$12.09 today but that's not the real price as the British was similar priced currency to NZ, so it was worth British 12 pound 1s that's equivalent to today's exchange rate of (0.54) NZ$22.39/lb of butter and that's wholesale rates..(see NZ archive reference)

Now that why NZ was a wealthy country and we had a great standard of living back then and naturally little debt...so lets continue to screw Mother England....eh. (see NZ Archives)

But things in NZ back then when I was a kid was highly expensive shoes,cars,machinery,TV radios etc...I grew up on a dairy farm...milking 80 cows a day was enough for a very good living and during the daytime there was ample leisure time...all that farmer lifestyle started to erode away by the mid 1960's...actually had to get off your arse and break more land in and milk more cows...The regulated drops in NZ currency was usually too late and had no lasting effect..by 1970 my Father and Mother were "going through the Mill" (hard times)..Honestly no country wanted to buy our dairy products packed in unsealed cardboard boxes or wrapped up in hessian..When the unsold butter became a mountain of rancid muck they would ship it out into mid-ocean and dump it overboard.. I still remember the dressed lamb carcasses in Hessian on the freight train to be exported overseas..they were fly blown...The old NZ attitude was back then was "stop whinging if you didn't like it go somewhere else" The inability to listen and learn about change took NZ culture decades to rectify..
The lag on my previous chart shows this inability to compete timeline (and instead relied on Govt subsidies)...Which reminds me how crazy the Subsidy on milk was back then..We lived on a dairy farm but bought bottled milk.

NZ archives

[JBmurc]

Yes I thought it might well have been ...but do you really think NZ would be a better country for all with such a strong NZD say parity against USD and stronger than the AUD ? .. If it does I hope I have moved into a different sector as If I don't most likely be earning around half what I did 10yrs ago...maybe importing aussie/yank seafood to feed kiwis

[Hoop]

I see the recent interest rate drop didn't see the Aussi$ tumble longer term ..it seems to have strengthened a bit..
Maybe the people are now seeing that lower interest rates may help the economy become stronger + equity markets and equalising with other currency with similar interest drops... thereby not always mean "a drop in interest rate = a drop in currency" in the longer term....The currency should reflect the health of that Nation

Let's see what happens to the NZ$ next week...Mr Wheeler has left things very late..the market is inverting and the 5yr swaps are at 2.08%..

Crikey!!! the market is telling us the OCR would not look out of place at 1.75%...The present 2.25% level looks very out of place now.

..It seems the RBNZ has it's tits in a tangle over John key's criticism and the media leak, they have gone "dark"..Not showing their intentions to give markets some sense of certainty and time to slowly correct is foolish in my opinion..Where is the Janet approach?...

Next week...The market is expecting the OCR to be cut by 0.25% to 2.0%...It wouldn't surprise me to see a 1.75% bombshell hit the markets...but I'm a pleb and my opinion is useless and worth nothing..

This is why the NZ$ currency went up with the Reserve Bank dropping the OCR from 2.25% to 2.0%
Winner...you will be a Wheeler fan now..eh?
JB...you won't be

[winner69]

This is a good article. A bit of Rodney touting for business but a good read

Why the forex market is smarter than the Reserve Bank

http://www.sra.co.nz/pdf/SmartForexJul16.pdf

Governor Wheeler has spent almost the last two years trying to talk the exNchange rate down. His comments and actions may have played a part in it falling for a period. However, since September last year the exchange rate has appreciated 12% contrary to the governor's continued calls for it to fall more in response to the falls in export prices and especially dairy farm incomes; despite him backing up his calls with OCR cuts. History is full of examples of the forex market, for all its shortcomings, being smarter than Reserve Bank governors and I don't expect things to be different this time around as discussed in this Raving. In our monthly forex reports I have been predicting upside in the exchange rate, with the upside being aided rather than hindered by the five OCR cuts the governor has delivered.

Did anybody read this?

[winner69]

This is why the NZ$ currency went up with the Reserve Bank dropping the OCR from 2.25% to 2.0%
Winner...you will be a Wheeler fan now..eh?
JB...you won't be

No Hoop - he shouldn't be cutting. Only creating a bigger bust one day