Concern grows over flying Kiwi dollar

By JIM EAGLES


The flying kiwi dollar is really starting to hurt the economy but the country's top business leaders do not believe the Government can - or should - do anything about it.

The Business Herald Business Leaders Survey for November has found growing concern at the impact of the dollar's relentless rise.

The currency took another leap while the survey responses were being collated but already several respondents had identified it as the biggest issue facing business.

On a scale of 0 to 10 - where 0 is strongly negative, 5 is neutral and 10 is highly positive - the high dollar's impact on the economy in general rated 3.7.

In terms of the effect on their own industries the business leaders were a little less pessimistic and gave it 4.1.

As might be expected, the level of concern about the currency varied considerably from industry to industry and between businesses with an export focus and those with a domestic focus.

A few respondents even indicated it had had a beneficial effect on their businesses. But several said it was having a severe impact.

The business leaders are in two minds about how long the upward trend will continue.

Just over half, 53 per cent, thought the kiwi would continue to rise against the US dollar over the next year. The rest thought it would not.

Asked what level they thought the kiwi might be at in 12 months, the predictions averaged out at 62.4USc, a bit lower than it is now.

They ranged from a low of 57USc to a high of 68USc.

Despite the collective concern, however, there was little interest in the musings by Finance Minister Michael Cullen that the Government has options for dealing with the situation.

An overwhelming 87 per cent of respondents said the Government should not try to lower the kiwi dollar's value.

Asked if they could suggest how the Government might lower the currency, most business leaders answered simply, "They can't", though one said, "Muldoon would".

A few promoted ideas such as a 1 per cent increase in interest rates "to dampen the domestic economy", reducing the size of the Government surplus through urgent spending on Auckland infrastructure and lower taxes, and taking steps to improve productivity and attract more overseas investment.

The survey - which goes out to 50 of the country's top business leaders - recorded considerable optimism.

The current business environment rated a decisively positive 6.7 and expectations of the business environment in 12 months were a reasonably positive 6, also significantly above the average.

Surprisingly, that has not translated into bigger plans for expansion. The likelihood of respondents' own businesses expanding gained a 6.

The verdict on the Government's impact on the economy was 3.9, about the same as usual, while the Reserve Bank's role rated 4.9.