Shoppers shouldn't expect to see an immediate rise in prices as a result of the falling dollar, says one economist. Photo / Steven McNicholl
Shoppers shouldn't expect to see an immediate rise in prices as a result of the falling dollar, says one economist. Photo / Steven McNicholl
Retailers may start to feel the squeeze in coming months after the fall of the kiwi dollar, but consumers are unlikely to see drastic changes to prices, according to retail experts.
The decline of the New Zealand dollar, from near-parity with the Australian dollar over Easter down to 88.86c this week, led to concerns from consumers that retail prices might increase to compensate, but ANZ chief economist Cameron Bagrie said consumers shouldn't expect to see immediate changes.
"When the New Zealand dollar went rocketing up near parity we didn't see the price of Australian products come down by 10 per cent so the fact that it has now corrected and probably then some, you just have to be careful about drawing a long bow and expecting big turbo- charged price rises from day one," Bagrie said.
"It's still early days because the product in the shops today will have been bought when the New Zealand dollar was a lot higher than it is today, so it will be another six or 12 months before the economic impact starts moving into the system."
Briscoe Group managing director Rod Duke said he had put hedging in place that would likely see the company through to Christmas, but he said if the dollar continued to slide the company would have to look at available options, adding that increasing prices was "a last resort".
His outlook for small- to medium-size retailers was less optimistic.
"We took out substantial cover [hedging] and there would be a lot of retailers who would not have done that. A lot," Duke said.
"It's very hard for small and medium-sized businesses to do that - spend millions and millions of dollars buying US dollars when it was 80 cents and now it's 60 cents. It's hard and very, very expensive."
Duke said he estimated 90 per cent of retailers in the city and shopping malls would not have been able to afford hedging and would have to look at how they could maintain margins fairly quickly.
Retailers Association chief executive Mark Johnston said it was difficult to tell how much of an impact the decline would have later in the year, but said it would not be a drastic jump. "If the dollar continues to weaken over time it will have an impact, it's got to have an impact on prices locally," he said.
It's still early days because the product in the shops today will have been bought when the New Zealand dollar was a lot higher than it is today, so it will be another six or 12 months before the economic impact starts moving into the system.
"I don't think you'll see price spikes or prices jumping up by a big amount but you might see a little bit of a correction in the marketplace six to 12 months down the track as the impact of the weaker dollar does come through."
Bagrie said competition in the retail sector was likely to keep prices down in most areas, particularly in electronics and technology, with most retailers having to absorb the extra costs.
"I think retailing across the board is generally pretty competitive and some goods out there, for example technology-based goods, they keep coming down in price, so it's pretty hard to change that trajectory."
First Retail Group managing director Chris Wilkinson said the drop in the dollar's value was likely to affect goods such as petrol and foodstuffs first, but could have a positive impact, with sellers looking to New Zealand suppliers over foreign ones.
"Food has had huge volatility in prices recently and we've seen a lot of Australian product on the shelves, particularly for the likes of dairy products and meat," Wilkinson said.
"At the moment if you go to Countdown, for instance, they have a lot of Australian products in terms of meat, dairy and some of the frozen goods," he said.
"It's cheaper to bring them in at the moment but what you'll find if this continues is that the suppliers will start looking more to onshore sourcing instead of offshore sourcing."
Winners and losers Petrol - Up Imported Food - Up Electronics and other technology - stay the same Clothes and shoes - stay the same Overseas travel - Up Books and music - Up
