Less bang for your buck

By Cassandra Mason

With shopping online becoming more expensive and cheap travel on the way out, Cassandra Mason asks what else will become pricier as the Kiwi dollar drops

Despite reaching a plateau, the New Zealand dollar recently traded at US76.8c - its lowest point in a year.

After months of cheap imported goods, online shopping and cost-effective international travel, the dollar's dip is expected to bring a hike in consumer prices.

Peaking in April, the NZD topped US86c, the highest it had been since hitting US88.4c in August 2011.

Since then, the currency "has fallen quite a long way", says BNZ currency strategist Mike Jones.

How does the low dollar affect you?As an island nation, Kiwis are particularly dependent on imported goods.

"The normal relationship is that the lower dollar means higher import costs," Jones says. "Higher prices for petrol and things like imported electronic goods."

The cost of shopping online is also set to go up as New Zealanders get less foreign currency for their buck.

Overseas holidays will also suffer, with the cheap travel deals Kiwis have been enjoying over the past six months starting to peter out.

However, the "big exception" is Australia, where the dollar has continued to depreciate against its Kiwi counterpart.

The New Zealand dollar touched its highest point in four-and-a-half years against the Australian dollar this month.

"If you're going on a holiday to the Gold Coast, it just got a whole lot cheaper," Jones says.

This also works the other way, deterring skiers from holidaying in New Zealand, usually a popular winter destination for Aussies.

Who benefits from a weaker dollar?While Kiwi consumers are bracing for higher prices, the dollar's slump is great for international tourism.

Affordability makes New Zealand a more attractive destination for overseas visitors, Mr Jones says.

The dropping dollar is also welcomed by the Government and by Kiwi exporters - who now receive a higher price for their goods when they're converted back into New Zealand dollars.

Even so, we shouldn't get too carried away as the Kiwi dollar is still "pretty high", Mr Jones says.

"Consumers are still enjoying relatively low prices for imported goods."

He believes the Kiwi dollar will probably claw its way back over the next few months.

Don't cancel your credit card just yetASB economist Christina Leung says it takes months for the effects of falling currency to reach retailers.

The past year has seen the prices of imported household items, such as clothing and electronics, plummet as the Kiwi dollar climbed.

But because the flow-through effects of the downward turn sometimes take months to arrive, retailers haven't yet experienced a significant shift in the other direction, Leung says.

Petrol prices are another one not to get too worried about, because global crude oil prices tend to move in tandem with the New Zealand dollar, offsetting price increases, she says.

- Hamilton News

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