It all comes down to the exchange rate. That's the message coming from a significant number of exporters responding to the CEOs survey. About a half of those CEOs identified the exchange rate as the single biggest factor that would assist their business to remain competitive internationally. The NZ dollar closed at US72.46c on September 24, a level not seen since May 2015. Apart from a sustained dip in May, the NZ dollar has been getting steadily stronger against the US greenback since January. At the close of play on September 24, the New Zealand dollar was fetching A95.03c, and exporters are wary of the impact of the strengthening dollar in the year ahead. Refining NZ chief executive Sjoerd Post nominated the "easing of the strength of the US dollar" as critical to exporters. EMA chief executive Kim Campbell -- whose organisation represents 14,500 companies -- said New Zealand's currency needs to become "more competitive". For some CEOs, the worry is not so much the strength of the NZ dollar but its volatility, and those hoping for stability may be disappointed by the uncertainty around the US Federal Funds rate. Markets are predicting an increase before the end of the year, even if signs of that increase occurring within the near future have cooled. A potential US interest rate hike combined with uncertainty brought about by the presidential election could see the US dollar weaken further. That would increase the price of New Zealand exports, reducing competitiveness. Those exporting to Australia are facing similar challenges, with the NZ dollar fetching A88.58c at this year's lowest point (March 15). Since then, the New Zealand-Australian rate has been relatively volatile, but the overall trend has been an upwards one. Orion Health chairman Andrew Ferrier told shareholders at the annual meeting the company's forecast for revenue growth of more than 20 per cent in the year ending March 31, 2017, wouldn't be met because the NZ dollar had appreciated against a number of currencies, meaning Orion will get less when sales are converted back into local currency. That currency movement also weighed on Orion's cash position. Another message from the exporters was the importance of strengthening channels into key growth markets. The CEO of one New Zealand meat exporter highlighted improving market access as the most important factor -- "especially through the removal of non tariff barriers in to China, Indonesia and elsewhere in Asia".
Given our punishing distance from export markets, ensuring we have the most efficient and lowest-cost supply chain is crucial.Mark Cairns, chief executive of Port of Tauranga, agrees. "Given our punishing distance from export markets, ensuring we have the most efficient and lowest-cost supply chain is crucial," he said. The port company has been working with Coda, its joint venture company, to reduce the number of one-way truck and train journeys within New Zealand and to make greater use of empty containers -- "rather than carting fresh air around the country," Cairns explains. "Successful execution of this strategy has seen our container volumes grow 12 per cent over the past year, compared with global cellular growth of 0.8 per cent," said Cairns. Supply chain efficiency has also been increased by aggregating enough cargo to make it attractive for larger ships to call into Tauranga, with the first 9500 TEU (20-foot equivalent) ship arriving on October 4. Along with the economic advantage of such efficiencies, there are also "significant environmental benefits associated with the larger ships generating a 31 per cent reduction in C02 emissions, which will be salient in meeting our Paris Accord commitments," Cairns said.
We are also seeing a shortage of factory labour -- people are finding it difficult to afford to live in Auckland (because of the cost of housing) and the labour pool is becoming smaller.Efficiencies at the other end are important for exporters, too. One brewer highlighted the single biggest factor to maintaining export competitiveness was creating "further export and trade partnerships with key markets". Small and medium enterprises (SMEs) from BusinessNZ and the EMA's membership also nominated a lower exchange rate and other factors, such as exporter competitiveness from New Zealand, implementation of the TPP agreement, financial support for research and development, and having monetary, fiscal and trade policy at a government level interlinked. A SME boss said New Zealand Trade and Enterprise and the Ministry of Foreign Affairs and Trade needed to provide close support "so that our trading partners actually follow free trade agreements. An FTA has no meaning unless our trading partner follows it." He suggested New Zealand should reject the rules of the Basel convention as "we're an island nation and don't share borders with other countries". Another SME chief said it was harder to find qualified engineers with manufacturing experience. "We are also seeing a shortage of factory labour -- people are finding it difficult to afford to live in Auckland (because of the cost of housing) and the labour pool is becoming smaller."