Currency woes to be discussed at Apec - Key

PM John Key. Photo / APN

New Zealand's currency woes are shared by many other economies in the AsiaPacific region and will be likely be major area of discussion at this weeks' Apec summit in Japan, says Prime Minister John Key.

However, while Mr Key says neither Apec or New Zealand officials are likely to come up with viable solutions, Finance Minister Bill English says the damage to exporters can be partly offset by sound policy.

In wake of the US Federal Reserve's recent "quantitative easing" or
injection of hundreds of billions of freshly minted dollars into its economy in a bid to stimulate growth, the greenback has lost value
against other currencies, including the New Zealand dollar. That has seen the kiwi dollar rise to just short of US80c, its highest level in more than two years severely reducing earnings for many exporters.

This week before leaving for Yokohama, Mr Key said the US dollar's weakness and the impact on exporting economies was discussed at length during the recent East Asia Summit in Hanoi, and would be "a big subject of debate at the Apec this week".

Mr Key said other Asia Pacific economies were dealing not only with the
relative strength of their currencies against the US dollar, but also against China's currency the yuan which is pegged to the greenback.

However, Mr Key was not holding great hopes that the Apec meeting of 21 Asia Pacific nations in Yokohama this week would generate any fast fix.

"It's clearly an area of great tension we all understand that but like everyone it's difficult to find a solution to it."

In the six monthly Financial Stability Report released yesterday, Reserve Bank Governor Alan Bollard said he feared the strength of the kiwi dollar against the greenback may derail New Zealand's "tepid" economic recovery and confirmed there was little he could about it other than hope the world's major economies could resolve their own currency tensions.

He again emphasised the RBNZ could not and would not try and control the level of the New Zealand dollar by intervening in currency markets.

"There's no way New Zealand can stand in the market against something which is being driven by the major economies offshore and that's always been the case."

Dr Bollard said he hoped this week's G20 meeting of major economies in South Korea - a summit which includes commodity exporting countries with similar interests to New Zealand - would make some progress in addressing currency tensions.

"It's not in the interests of the major economies to do unilateral things which lead to more broader problems and think that's come home to them."

Yesterday Mr English told Parliament that while currency intervention by the Reserve Bank was impractical, the Government was taking "a whole series of actions" to assist exporters.

They included dealing with domestic cost structures so that exporters could be more competitive, persisting with free trade agreements to
increase the volume and value of trade, and getting the domestic economy under control "after many years of reckless growth" under Labour.