Why the tanking New Zealand Dollar isn't always bad

With the NZ dollar reaching a month-low of 77.64 US cents on Monday, it’s easy to start thinking doom and gloom.

But don’t panic just yet.

A falling NZ dollar actually spells good and bad news for small businesses.

The bad news:

Buying things from other countries gets more expensive. Petrol, cars, consumer electronics and food sourced from overseas are some examples. Retailers will either make less money, or more often, increase the price.

Thinking of a holiday? If you travel to another country you won’t be getting as much in return. If the dollar falls even lower to 75 US cents, then NZ$100 converts to US$75. You get less to spend at Disneyland.

The good news:

All exporters automatically get a pay rise (if they quote in a foreign currency).
If US$1 gets you NZ$1.20, and then the NZ dollar falls, you may end up getting NZ$1.35 for each US$1.

If you sold something for US$10,000 instead of getting NZ$12,000, you would get NZ$13,500. For doing nothing different.

If exporters earn more, they can focus on gowth and innovation by reinvesting in the business and employing more people.

It’s also pretty good for the tourism sector. Overseas visitors coming to NZ get more for their money (the reverse for us), so suddenly we become a cheaper place to travel to.

So next time you hear that the NZ dollar is falling, chances are the media will say “It’s all doom and gloom – things we import will increase in price and a XXXX on the Gold Coast will cost more”.

But there is also a dull roar of relief from exporters, farmers, and the tourism industry as their hard work realises more profit.

The NZ dollar does seem extremely volatile right now - and with dairy prices continuing to fall I imagine it hasn’t finished its downward trend just yet.

@CraigM FYI, you replied to a post from November 2014