Falling dollar good news for region

While the rest of the country cries over low export dairy prices, Hawke's Bay's exporters are expected to benefit from the low kiwi dollar. Photo / File

The expected national economic slump triggered by poor dairy returns has an upside for Hawke's Bay, the region with the least amount of dairy farms, as the kiwi dollar falls along with interest rates.

With the world supply of dairy products increasing, dairy prices fell 11 per cent last week, for a 38 per cent decline over four months.

In the same period, the dollar has fallen 13 per cent on a trade-weighted basis and 14.5 per cent against the US dollar.

Business Hawke's Bay chief executive Susan White said the lower dollar was good news for a region with an export focus.

"The more favourable exchange rate has a positive impact on margins, giving better returns for the exporter, and that directly benefits the Hawke's Bay economy," she said.

Federated Farmers Hawke's Bay president Will Foley said beef farmers were in for a double stroke of good fortune, with prices already at near-record levels.

Demand for sheep was currently down, so it would offset lower prices. On the other side of the coin, increased costs of fuel and fertiliser, the two biggest farm expenses, would eventually flow through.

Hawke's Bay had a diverse range of export products and a strong tourism sector "so by and large, there should be a net benefit".

With inflation low - June quarter inflation data recorded the lowest rate of domestic inflation for 14 years - and a deterioration of business and consumer confidence, the majority of economists are picking the Reserve Bank will cut the official cash rate from 3.25 to 3 per cent this week, lowering to 2.5 per cent by March next year.

Lower interest rates would soften the blow for dairy farmers. "Most dairy farmers are probably having to be adding to their overdrafts to just get by this year," Mr Foley said.

Pipfruit New Zealand business development manager Gary Jones said many apple sales this year were at pre-determined rates but next season looked promising.

He said growers had experienced good years recently.

"We gave up complaining about the high exchange rate and got on with business," he said.

"The shift in the dollar bodes extremely well, going forward."

Furniture and furnishings exporter Furnware's managing director Hamish Whyte said that while the lower dollar helped profit it was no time to be complacent.

"The good thing about long-term commitment in these markets is, when you do get a softening of the dollar, then obviously you reap a better margin," he said.

"We can't rely on the dollar to make our business, so we need to be focused on creating a better margin, no matter what the dollar is."

Lower interest rates gave companies more opportunity and was good for employees with mortgages, he said.

"If it enables them to have a slightly better financial outlook, then that's good for the business as well."

Black and White Mortgages broker Karrie Stephens said falling interest rates should accelerate the usual spring-to-summer increase in house purchases.

The Hawke's Bay market has experienced higher-than-normal volumes but they have not resulted in higher sale price medians. "There are 4.75 per cent rates out there, which should prompt people to start buying," she said. The expected drop in the bank rate would be an added incentive.