Roundup: New Zealand counting cost of parity with Australia

Parity, it's a lofty word ringing with ambitions for equality and fairness.

But it's currently sending a chill through New Zealand exporters, manufacturers and workers.

The New Zealand dollar, with a market value long described as unjustifiable and unsustainable by the country's central bank, has been nudging towards a one-to-one parity with the neighboring Australian dollar in recent weeks.

This has stoked trans-Tasman rivalry, with some New Zealanders boasting that the country's growing economy is getting the recognition it deserves.

It is also being lauded for keeping oil and other imported commodities cheap and for making holidays abroad more affordable.

But warning sirens are growing louder, raising the alarm that parity will bring business closures and job losses as New Zealand exporters lose out to cheaper foreign competition.

The country's over-reliance on its pillar dairy industry has already been highlighted this year as international commodity prices plunged with an over-supply.

Now commentators fear parity could be the final straw for many struggling dairy farmers.

On Wednesday, the New Zealand dollar (75 U.S. cents) traded at 98.05 Australian cents, up from 98.04 cents on Tuesday.

On Monday it hit a high of 99.78 Australian cents, the closest it has come to parity since it was floated 30 years ago.

Despite the dip, economists at the ASB Bank on Tuesday released a forecast saying they were still predicting parity sometime this year.

The New Zealand Timber Industry Federation went public Wednesday with its fears that parity or near-parity would close sawmills.

Australia took 21 percent of New Zealand timber exports, but Australian customers had other options including buying from Australian mills, importing from other countries or using substitutes, federation president John McVicar said.

"Since 2012, the rising value of the New Zealand dollar has eroded 20 percent of the value of our timber sold in Australia," McVicar said in a statement.

"There simply isn't that sort of margin in the product and mills will now be supplying at a loss to stay in the market. That scenario is not sustainable and will be devastating for many mills. "

The main opposition Labor Party highlighted the damage to New Zealand businesses with a chart showing how exports to Australia had declined as the New Zealand dollar rose over the last four years.

In the three months to February this year, exports were valued at 1.72 billion NZ dollars (1.29 billion U.S. dollars) when the New Zealand dollar was valued at an average of 94 Australian cents.

That compared with 2.29 billion NZ dollars (1.72 billion U.S. dollars) in exports to Australia in the three months to February 2012 when the NZ dollar was at an average of 76 Australian cents.

"That's a drop of 600 million NZ dollars (451.8 million U.S. dollars), a very big hole to fill," Labor leader Andrew Little said in a statement Wednesday.

The government was trying to "cheerlead on parity", but it indicated an Australian economy in trouble, rather than a strong New Zealand economy, and it would cost jobs and pay rises.

"We are an exporting country and we need our businesses to be competitive," he said.

Last month, the New Zealand Manufacturers and Exporters Association (NZMEA) warned thousands of jobs would be lost if the government and central bank failed to take action on the overvalued dollar.

"The Reserve Bank of New Zealand (RBNZ) continues to express concern, like a broken record, around the 'unjustified and unsustainable' level of our currency, but there has yet to be any real action to address the issue," NZMEA chief executive John Walley said in a statement.

He also criticized the government for its lack of empathy for the export sector, despite its long-standing goal of increasing exports.

The RBNZ could cut its official cash rate, standing at 3.5 percent, this year if inflation remained low and the RBNZ and government took more measures to slow house price inflation.

"This could bring our interest rates closer in line with the rest of the developed world and put our tradable sector in a better position to thrive with a more balanced exchange rate," he said.

However, Prime Minister John Key, who made his fortune as a currency trader, appeared to offer no comfort when he told Radio New Zealand Tuesday that exporters should continue to invest and drive productivity.

Key said the strength against the Australian dollar reflected the perception among those who priced currencies of which economy was in better shape.

"It is weakness in Australia as well ... but I think over the last six or seven years we've seen a growing confidence in New Zealand businesses," he said.

Finance Minister Bill English was also short on answers.

"We're fortunate to have a very resilient manufacturing sector. It's dealt with a terrific amount of pressure over the last four or five years," English told Radio New Zealand Tuesday.

"But the strength of this exchange rate to Australia is a bit new for them and they will have to adapt." Endi