Why A High Exchange Rate Is Good

A high exchange is good because it increases New Zealand’s global purchasing power.

Because our grey-haired corporate elite have consistently failed to innovate outside of a handful of well run companies, we desperately rely on imports for the cool things we can’t make here.

This means that a high exchange rate papers over New Zealand’s pathetic track record in economic growth and “100-bagger” innovation.

It also means that the most marginal manufacturers will go to the wall because they’ve failed to add enough value to make exchange rate changes unlikely to erode their margins.

If I was a manufacturer in New Zealand, I’d be asking – how can I reimagine my entire business so it is still profitable if 1NZD = 1USD? How can I move from razor thin margins to fat margins that reflect enormous value creation?

We have no idea what will happen to the exchange rate because of the massive liquidity bubble sloshing around the globe because of quantitative easing in the US.

But if you fail to build in the possibility of dollar parity to your business model, you deserve to go to the wall. You have no right to blame a high exchange rate for your inept business management.