Businesses predict NZD parity with AUD

The latest ASB Kiwi Dollar Barometer finds the majority of businesses surveyed expect the NZD to reach parity with the AUD over the coming year.  

Over the past 12 months, the NZD/AUD has surged from 80 cents to 94 cents. The Barometer revealed that 70% of businesses surveyed expect the strengthening of the NZD relative to the AUD to continue and that parity will be reached within the next year. 

ASB Chief Economist Nick Tuffley says, “The more favourable growth prospects of the New Zealand economy are underpinning the strong NZ dollar against the Australian dollar, particularly given there has been some deceleration in the Australian economy.”

Nonetheless, businesses are generally expecting the NZD/USD to ease over the coming year. However importers remain more bullish on the NZD, particularly in the short term.

The Barometer finds a greater proportion of small businesses reported the higher NZD/AUD had damaged their operating margin, relative to large businesses. In contrast, a greater proportion of large businesses reported their operating margin had benefited from the NZD/AUD strength. 

“Large businesses are both more likely to hedge and tend to hedge almost all their foreign exchange exposure. These results suggest there is scope for small businesses to make greater use of hedging to manage their foreign exchange risks to mitigate the negative effects of any adverse movements in the currency,” concludes Tuffley.