Lower aussie dollar boon for exporters

A kiwi dollar reaching record lows against the Australian currency is providing benefits for New Zealand exporters.

The New Zealand currency hit a 19-year low of A72.88c against the aussie late last week, but was back around A73.30c last night.

Export New Zealand executive director Catherine Beard said the foreign exchange situation was beneficial for exporters, given the dominance of Australia as a market for this country's products.

"It's still our biggest export market," Beard said. "I'm hearing that [the exchange rate] is opening up a competitive situation for manufacturing in New Zealand."

Les Kendall, chief executive of air conditioning and ventilation equipment manufacturer Temperzone, said the firm's profit margins on products exported to Australia had improved since the kiwi's value dropped against the aussie.

Around 85 per cent of the company's exports go to Australia, Kendall said.

At the same time, however, the company buys components on theglobal market in United States dollars.

That can provide a benefit for some New Zealand manufacturers, with the kiwi's currently high value against the American currency increasing purchasing power.

But Kendall said many of Temperzone's Asian suppliers had put their prices up following a decline in the greenback's value.

And because the company also sells finished units in Asia in US dollars, the kiwi's high exchange rate with that currency made the firm's products less competitive in those markets, he said.

"Overall ... because Australia is our main market the current settings on exchange rates are certainly positive and we'd like to see the current cross levels persist for as long as possible."

Westpac senior currency strategist Imre Speizer said the bank had a strong view that the kiwi would strengthen against the aussie to be trading at around A80c by the end of this year.

Speizer said that if this morning's announcement by the Reserve Bank reveals a 50 basis point cut to the OCR, accompanied by a pessimistic statement, the New Zealand dollar could fall by as much as 1c against the greenback today.

"Our preferred outcome is a 50-point cut with a fairly neutral statement and that would see the kiwi fall by a quarter of a cent," he said.

Speizer said that in the short term the New Zealand dollar was vulnerable to falling as low as US72c. Yesterday it was at US73.89c.

Longer term, a drop in commodity prices and global risk appetite could push the kiwi down into the upper 60c range against the greenback, he said.

Sir William Gallagher, chief executive of Hamilton-based manufacturer Gallagher Group, said the company - best known for its electric fence technology - was also gaining some benefit from the New Zealand dollar's low cross rate with the aussie.

"It really makes Australia a worthwhile market - it's our biggest market by far."