KEY POINTS:
Petrol prices rose this morning after the New Zealand's dollar lost 3c against the US dollar in one day.
The dollar fell from US71.5c at the start of yesterday to a low of US68.23c, but was back up slightly at US69.02c when the New Zealand market closed.
At about 7.30 this morning Findata reported the kiwi as trading at US68.42c.
Petrol giant BP last night was the first to put up prices. The price of 91 petrol at its Dominion Rd, Auckland branch had gone up 3c to 156.9c and diesel also rose 3c to 105.9c.
The kiwi has dropped more than 10 per cent in a week - one of its most dramatic slumps since it was floated 22 years ago.
UBS Investment Bank senior economist Robin Clements said that if it stayed below US70c petrol prices could rise by 5 per cent.
"It depends if the decline is sustained. If it does stick, probably the first thing we will see is a rise in petrol prices."
But any increases were unlikely to be as steep as those of this time last year, when the dollar was at less than US62c and 91-octane petrol peaked at $1.75 a litre.
Imported electronic goods may also rise in price.
The dollar's fall is good news for exporters and meat and wool farmers, who have been feeling the pinch as the kiwi's big rises cut into the New Zealand-dollar value of prices they received from overseas buyers.
Importers Institute secretary Daniel Silva said consumers should expect price increases on most imported goods.
"When you think of importing, you tend to just think of the luxury goods but nearly everything is imported - materials, fuel, computers, medical equipment. The effect will be widespread and will affect most people."
He said some goods would go up in price almost immediately.
Many worried importers contacted his office yesterday. "They were dismayed. It was predicted it would go down but not this fast."
But exporters would be celebrating after the fall, he said.
"It's very unhealthy, but they will generally benefit with a lower dollar. They will be able to get something two weeks from now that will be much cheaper than they could have gotten it for two weeks ago."
The chief executive of the Travel Agents Association and the Inbound Tour Operators Council, Paul Yeo, said he could not see ticket prices or fuel surcharges rising soon.
"The dollar has been at record highs, which was not a normality. I think it is coming back to normality, business as usual.
"Even though it's taken a tumble, it's still relatively high. When you get a change like this people don't all of a sudden chop and change.
"Visitors to New Zealand will hopefully spend a bit more and those going overseas may find they have slightly less to spend on that cup of coffee in London.
"It may make Kiwis rethink about travelling domestically."
Bank of New Zealand senior economist Craig Ebert said most people had wanted a rebalancing of the economy away from domestic spending and on to exporters and import-competing companies.
"We thought the adjustment would be gradual over a year or two. This is a really abrupt correction."
The Reserve Bank took the unusual step of issuing a statement to say it was "closely following" developments in financial markets at home and overseas.
The volatility was reflected in sharemarkets around the world.
On the New Zealand exchange, stocks fell 1 per cent to an eight-month low and the NZSX-50 index closed down 46.52 points at 3957.94.
The index has fallen 5 per cent in a week, and yesterday was the first time it had been below 4000 since mid-December.
US stocks have slumped this morning, on signs credit markets were seizing up, threatening economic growth.
The three major US indexes were down between 1.2 and 1.8 per cent.
An early blow to investor confidence came from Countrywide Financial Corp. The biggest US mortgage lender said it had to draw down an entire $11.5 billion bank credit line after it was essentially shut out of other credit markets.
Export companies were the exception to the downward trend. Fisher & Paykel Healthcare's share price rose 3 per cent to $3.52, and fish exporter Sanford gained 4 per cent to $4.28.
The dollar's dramatic drop could also ease the pain felt by sheep and beef farmers, but only if it stayed down until at least next season, an industry leader said yesterday.
Meat and Wool New Zealand chairman Mike Petersen said the fall was very good news for meat exporters, but unfortunately most of the season's product had been sold at a higher exchange rate.
"We're not going to see any benefit until we start our main selling season - which is from January onwards next year," he said.
"If it stayed down at around even US70c, then we're starting to look at returns improving on last year instead of halving, as we were looking at only a few weeks ago."
Mr Petersen said that every cent the dollar went up or down relative to the US dollar was worth about $85 million to agriculture.
"So if it goes down 10c against the US dollar, that's about $850 million that will come back."
But that was worth only about $400 million to farmers after meat processing and other costs.
PGG-Wrightson chief executive Barry Brook said dairy farmers were enjoying boom times but they could get even better.
If the dollar continued to fall, dairy giant Fonterra's payout was likely to increase to more than $6 a kilogram of milk solids.
- additional reporting, NZPA, Otago Daily Times
