Exports feel rise against aussie

The New Zealand dollar's descent from its US71c high against the United States dollar this year had local exporters heaving a sigh of relief, but they are beginning to pant again as the kiwi firms against the aussie.

On Friday, the kiwi was buying A93.10c - more than 8c higher than it was in late April and not too far off its A94.47c high in July 1995. It has been above A90c mark since late June.

Australia is our main trading partner and largest export market. Export receipts to Australia totalled $6.2 billion in the April year, up almost 3 per cent on the previous year, despite big annual falls in most other main markets.

While the kiwi's rise is good news for Australian companies selling goods to New Zealand, local exporters to Australia are seeing their profit margins squeezed.

In its July survey of manufacturing, the Canterbury Manufacturers' Association noted a fall in export sales and said this was "beginning to form a trend".

In a commentary accompanying the survey, association chief executive John Walley said fears were emerging among manufacturers of "yet more pressure on the Australia exchange rate".

He said Reserve Bank of New Zealand moves to raise interest rates in an attempt to tame the "irrepressible" domestic economy were fuelling fears of an even higher rate against the aussie.

"This really hurts our manufacturers as returns shrink on Australian sales."

Economists generally expect the rise to put pressure on exporters' profit margins rather than cause a fall in trade volumes - at least in the short term.

Export Institute chief executive Bob Walters said exporters realised it was difficult to get established in an overseas market, "having done so, you simply have to perform and must maintain that continuity, regardless of whether you like it or not ... you pretty much have to grit your teeth and keep going".

The kiwi's rise above the US70c mark this year had exporters sweating, but its present run against the aussie had potential to crank the heat up to scorching levels.

"We have so much more of our trade, and particularly our middle and smaller exporter trade, going to Australia, it's hurting everyone," Mr Walters said.

While Fisher and Paykel Appliances chief executive John Bongard described the current exchange level as "horrible", his company was cushioned from its worst effects.

"We take pretty extensive forward cover. We've got about 80 per cent of our cover out to the end of the financial year at about A87c.

"Having said that we've got the other 20 per cent that we've got to cover at pretty much spot."

The kiwi's rise against the aussie is largely because of yield-chasing foreign investors favouring it over the Australian unit.

The RBNZ currently has a 6.00 per cent overnight cash rate, as opposed to the Reserve Bank of Australia's 5.25 per cent.

- NZPA