The risk of the kiwi dollar remaining higher than expected over the next four years is the biggest risk to Government forecasts for growth in the nation’s farm, forestry and seafood exports, a new Government report says. Source: New Zealand Herald News
The trade-weighted index (TWI) is forecast to fall 8.4 per cent to 64.7 by March 2016, with weakness against the Australian dollar and yen offsetting gains versus the greenback, pound and euro, according to the Ministry for Primary Industries 2012 situation and outlook report.
If the decline does not eventuate, revenue from dairy, meat, wool and forestry could be 20 per cent below the ministry’s baseline assumptions, the report says.
The report says that in the shorter term, weak European and US economic performance, and lower interest rates relative to New Zealand drive the assumed strength of the New Zealand dollar.
Longer term, New Zealand’s high and growing level of international indebtedness is expected to be constrained by limits to lenders’ appetite for risk, eventually reducing the strength of the New Zealand dollar.
New Zealand’s primary industries have benefitted from increased trade ties with emerging Asia, most notably China, where investment and private consumption remained strong because of China’s solid corporate profits and rising household income.
The outlook for New Zealand’s dairy and forestry exports depends to a large extent on the Chinese economy maintaining its momentum. That contrasts with the European Union, where there is a risk of further economic deterioration, and the US, where a weak housing market is weighing on demand for forest products.
South East Asian countries and Latin America are expected to continue to have stronger growth, it said.
