Forum Archive Index - December 2000

["Jeremy" <jeremy@electrosilk.net>]

> but the passenger arrivals won't keep climbing if the NZ dollar keeps
> climbing will they?
> Vote early and often for a low NZ $.

I'm sure someone will correct me, but my hazy memory of economics says that
there is a strong link between demand for a country's goods and the relative
value of its dollar.

That is if people want to buy NZ priced goods they have to buy NZ currency
to do so. So the NZ dollar goes up in price.  The more goods people want,
the higher the dollar goes - See Japanese Yen for classical example.

When you are asking for a lower dollar you are basically hoping for a loss
of overseas demand.  The only people who benefit under this arrangement are
a lucky few exporters (usually farmers) who get rich at everyone else's
expense.

If on the other hand you have a great demand for NZ goods, the value of the
dollar rises, the country becomes overall richer and the money is more
equally distributed.

Airlines lose under a low dollar scenario because they are not primary
producers.  They are basically sausage machines converting American aircraft
and Middle East oil into revenue passenger kilometers.  Their costs are
almost all overseas based, whether by direct purchase of aircraft or USD
denominated leases to maintain.  A higher dollar can only help them.

With all the industries, create the demand for the goods from overseas and
the money will flow and the dollar will rise and everyone will be happy :-)

Jeremy



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