The recent correction in the New Zealand dollar has brought the kiwi to an acceptable level, Trade Minister Phil Goff said on Sunday. Goff, in Manila for a meeting of Asian trade ministers, told Reuters the New Zealand economy had been remarkably resilient with the dollar at recent highs of 81 US cents, but the government had believed that was overvalued.
That high compared with a low of 39 cents in 1999/2000, he noted. In recent days the currency has traded around 70 cents. It finished just above 72 cents on Friday after hitting an 8-1/2-month low below 67 cents on August 17.
Further falls posed the danger of importing inflation, Goff said.
"Broadly, it's been within the band of 60-70 cents and I'm very relaxed at the dollar continuing within that band," he said.
The kiwi had weakened amid concerns about global credit markets. Its rise was previously fuelled by the carry trade in which investors borrow in low-yielding currencies such as the yen to place funds in high-yielders such as the New Zealand dollar.
Goff said New Zealand's dairy sector and hi-tech industries that are highly competitive on quality grounds had not been affected by the strength of the currency. But it had created difficulties for some sectors such as wool, meat and fish.
"The dollar coming off its peak is broadly regarded as a good thing by New Zealand," Goff said. "Equally, we wouldn't be wanting the dollar to fall back to its earlier levels because we think the state of the New Zealand economy justifies a reasonably strong dollar-but not at the level it got to."
Goff said global credit concerns were also helping to ease some inflationary pressures in the New Zealand economy. "So we'll be quite happy to see a plateauing and maybe a slight movement down in the property market as taking some of that inflationary pressure away," he said.
"Equally, if your dollar falls too fast then the cost of imported goods goes up and that then becomes a factor." Goff said a weaker dollar could help ease New Zealand's current account deficit, which is driven by consumer spending that is only partially offset by a government surplus.