5 Jul 2016

Election uncertainty takes toll on NZ firms

5:37 am on 5 July 2016

The deadlocked Australian election is not helping exporters already struggling to compete across the Tasman due to a high dollar.

Australia is New Zealand's biggest trade partner, with two-way trade worth $24 billion in the year to March, ahead of China on $22bn.

Analysts expect Australian-based firms to check their spending and investment plans until a clearer picture emerges of the political landscape.

The election results will become clearer today as more votes are counted. As of Monday evening, the government had won 68 seats to Labor's 67, with 10 remaining in doubt and 5 held by other parties. A majority government would require 76 seats.

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Photo: 123rf

Christchurch-based Skope Industries exports 80 percent of its chillers and freezers to Australia.

Managing director Guy Stewart is currently in Sydney and said there was a quiet resignation among Australians he had talked to about the deadlocked election.

"There's no definite outcome. There's no leadership. Move on, we're back where we started.

"Which I think has been an ongoing problem with Australian politics. They don't have really solid leadership and guidance by the government."

Political uncertainty could spell bad news for New Zealand exporters as Australian firms consider deferring new orders, Mr Stewart said.

"The major businesses will be less certain about investing; be it investing with us in a large scale product, or merger and acquisitions. The won't be doing it in a hurry, until they have a level of certainty."

Some 40 percent of manufactured goods are sent across the Tasman.

Manufacturers and Exporters Association chief executive Dieter Adam said his members were already struggling with a surging dollar that was not far off parity with its Australian counterpart.

"And I suspect that even if we have a government, it won't be a very clear cut situation.

"So we'll possibly look at a prolonged period of uncertainty around the exchange rate and that's potentially concerning depending on which way it goes."

On the flip side, households are enjoying cheaper holidays across the Tasman.

More than 1.1 million New Zealanders headed to Sydney, Melbourne and the Gold Coast for a break in the year to May.

Brent Thomas of House of Travel said he was busy.

"From the New Zealand point of view going to Australia, it's good news because the dollar is hitting $A96 cents level. That's as high as its been for some months now, and that obviously gives a lot of purchasing power for New Zealanders."

And it's not just Australia.

Britain's decision to leave Europe has also made that part of the world a cheaper place to visit, Mr Thomas said.

"We're definitely seeing more people wanting to travel and they're certainly booking that last minute because of that New Zealand dollar."

There are few signs the currency will weaken soon.

Indeed, some analysts argue that the country is now a safe haven for investors given there's plenty more risk and potential shocks out there.

That's good news for travellers and shoppers - but for exporters, times may remain tough for some time yet.

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