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Source: NZPA / Ross Setford -
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With the kiwi dollar hovering around 75 US cents there are growing calls for exporters to put in place long-term strategy that helps hedge future risks.
Bancorp Treasury Services associate director Peter Cavanaugh says long-term planning, in the lamb industry for example, is not just a matter of long-term fixed rate exchange contracts but integrating financial risk management with business risk management.
Cavanaugh says most meat companies do not to take forward exchange contracts because they do not have long-term commitment with underlying pricing and volume.
If, however, a single integrated approach between farmers and processors was taken it would be easier for the industry to buffer against different risks.
This could take the form of long-term supply contracts between farmers and processors.
"It just adds certainty to the industry," he says.
Meanwhile, the CEO of the Manufacturers and Exporters Association (EMA) John Walley says New Zealand needs to look at changing its policy framework that will better stabilise its external economy.
While there is little political appetite for this at the moment, Walley says it must be considered, and not just for the benefit of those in the trading economy like farmers, manufacturers and exporters.
"If we think about the non-trading economy as a table and that table is held up by four legs of the export economy, if we continue to grow the non-trading economy through international debt, sooner or later the table legs are going to break.
"When the legs fail we see a real sell-off in the currency as confidence ebbs away," he says.
If the currency weakens further, Walley says jobs will be lost and medium term investment will drop away, threatening future job creation.
The EMA says the manufacturing sector employs around one in 10 people directly and as many as five jobs depend on each person employed.
