By Bernard Hickey
It was the best of times. It was the worst of times.
The New Zealand dollar jumped to post-float highs this week against the British pound and the Japanese yen. It also rose to a 3 and a half year high against the Australian dollar.
On a Trade Weighted basis, the Kiwi dollar broke through its July 24, 2007 high. It's a wonderful time to be an importer.
This strong New Zealand dollar means it costs a lot less in New Zealand dollars to buy a car, a flat screen television or an iPad. It's a fantastic time to go on holiday.
It means you can travel for longer, stay in fancier hotels and buy more souvenirs to clog up the closet.
It's also a time for consumers to be cautious and just a little bit ruthless.
One big risk in times like this when the currency is high is that importers and retailers keep their prices at the same levels as when the New Zealand dollar was lower. That means the wholesaler, importer and/or the retailer essentially pocket the price reduction on the way through.
That's why consumers need to be especially vigilant and demanding.
They should know where the imported good was imported from and how much the New Zealand dollar has risen in recent months.
Remember that most importers and wholesalers will order items months in advance. If there has been a big rise in the currency in the meantime some will not benefit because they paid in advance or hedged.
Others will be able to sell at the same New Zealand dollar price, but pay much less in the base currency of the imported good. Some will genuinely be able to say they had already paid at the depressed rate months ago and are not pocketing the difference.
Whatever the case, with just-in-time inventory systems and air freight that delay is rapidly telescoping down to not much.
Certainly ask the retailer when they actually paid the wholesale price. If in doubt, simply demand a price cut now, using the currency's rise as your ammunition.
For your information for your shopping trip this afternoon, in the last 6 months the New Zealand dollar has risen 6% against the US dollar (which also means for Chinese imports given the US$ is the main currency used in trade with China), 9.2% vs the pound, is flat vs the euro and is up a stonking 25% against the yen.
That means push the hardest on Japanese made items, especially the used imported cars.
This currency strength is of course painful for exporters and those who compete with imports. It is costing thousands of jobs.
However, consumers who follow the signals being sent by the currency will buy imports rather than locally made items, or outsource production or services that were being made here.
The high currency is great in the short term for consumers, just as long as they have a job and income, or a very good line of credit.
Buy now and pay later - it's the Kiwi dollar way.
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This article first appeared in the Herald on Sunday. It is used here with permission.
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