Forum Archive Index - December 2000

["Jeremy" <jeremy@electrosilk.net>]

From: G Stolwyk

> H: I think that we can live with 45 US cents and 80 Aus.cents; those
levels will still promote tourism and exports and cut back on inflation.

You are wishing for the Kiwi to drop to record low levels against the
Aussie.  Why ?  You are also wishing the Aussie to relatively high levels
against the USD, again why ?

> The problem is that the exporters go hungry for a number of years
> and when the exchange rate falls, they go on a spending spree.
> This improves local economies of course. Over time, the NZ
> economy will always be fragile due to international pricing of
commodities.

The fundamental thing you are not addressing is the lack of capacity of the
NZ econonomy to take advantage of trading opportunities.  You can only grow
so much wheat, sheep, cows, trees etc on the existing land.  You will never
*ever* be able to increase this productiviity without radical changes to
what you do and how you do it.

Your stereotyped response is to drop the dollar so that the exporters get
more money for doing the same work.  You add no value, just distribute more
of the rapidly diminishing pie to the exporter and create a temporary
illusion of wealth.

Instead of wishing for imaginary exchange levels, how about wishing for a
fundamental change in the economy of NZ, to go from a basic agro-business
based economy to one that creates value by hard work and enterprise and
creates real value in its exports.  Singapore is a good example of a country
that has no natural resources, but has a fantastic ability to work and add
value to everything it does.

Perpetual morbid preoccupation with dropping exchange rates is a symptom of
a dying economy.  Preoccupation with creating value is the sign of a healthy
economy.

My (paraphrased) quote for the year is "Look after the creation of value and
the exchange rates will take care of themselves"

Jeremy




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