Online world fuels currency fluctuation hit

I wonder how many of our treasurers, chancellors and finance ministers thought of the impact of today's online world when setting their economic policies.
Written by Darren Greenwood, Contributor

I wonder how many of our treasurers, chancellors and finance ministers thought of the impact of today's online world when setting their economic policies.

For example, a strong dollar should be a greater concern today than it was in the past. Last week, we heard that delivery company DHL is increasingly busy thanks to New Zealanders buying stuff from overseas websites like eBay.

Consumers might also buy direct from the manufacturers or retailers themselves, and now thanks to the internet we are savvy enough not to be ripped off by retailers, such as when Adidas was charging far more here for rugby kits than it was overseas.

In former days, they could have got away with it. We could not parallel import quite so easily like we can today.

Australia has seen such e-commerce become such a major issue too, leading to many complaints from its domestic retailers as shoppers sought online bargains.

Coupled with low shipping costs, the vagaries of the exchange rates mean that e-commerce can have a major impact on sales in your domestic retail sector.

A strong exchange rate also impacts on the tech sector, especially as its products are more mobile than say a heavy and bulky product like a shipment of meat, cars or iron ore.

Such ease of transportation, perhaps even by sending software via the internet, has done much to remove trade barriers, creating a more open, global economy.

Last week, we saw how tech company "target="_blank" class="c-regularLink" target="_blank" rel="noopener nofollow">Rakon blame the strong Kiwi dollar on losses it has generated.

Some weeks back in London, I caught up with friends from a Kiwi software company who were flogging their product across Europe. On the one hand they told me, the cost of them living in the UK capital was now cheap, but the return on sales, when converted back into Kiwi dollars, were noticeably less than a few years back when Sterling was strong.

Today's online age seems to have fuelled the impacts of currency fluctuations on the domestic economy. Trouble is, while the Australian Productivity Commission has looked at the impact of the strong ocker dollar, we have seen less controversy and action here concerning the strong New Zealand dollar.

Manufacturers and farmers have bleated a little, but the New Zealand Government is dismissing fears that a strong Kiwi dollar could create a "Dutch disease effect" like what the mining sector is reportedly creating in Australia.

One can only hope that politics and electoral timetables are at work and that after the polls close this weekend, the Reserve Bank will finally intervene in the markets.

Currently, it could be argued that our currency trader Prime Minister John Key is keen for a strong dollar to keep petrol and other import prices lower to make Kiwis feel richer in the run up to Polling Day on Saturday.

Then, once safely returned to office, a Key government can look to devalue the Kiwi dollar and help keep our hard-pressed exporters happy. If he does not, and our successful knowledge and other economies are strangled by a strong dollar, those exporters won't be able to create the jobs the country needs and come election time in 2014, our PM will ultimately pay the political price.

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