A brief digression on economics

One of things I have not commented on before is how very expensive New Zealand is for a traveller from the UK, or I suspect the US or Euro area. For many years running up to the global financial crisis in 2008 the exchange rate between the NZ$ and the £ was pretty constant at about 3NZ$ to £1.

After the financial crisis, the UK (and the US and Europe) had to take desperate measures to try and minimise the impact and restart growth. They did this through a variety of measures all of which had the practical effect of devaluing the currency against other currencies, such as the NZ$ which were not so implicated in the financial crisis. The practical effect of this is that the exchange rate of now 1.9NZ$ to £1; essentially New Zealand goods purchased in £s are more than 30% more expensive than they were in 2008.

This has a number of obvious implications:

1. For the traveller from the UK, US or Euro, New Zealand is a lot more expensive than it was. In fact it is now very expansive indeed.

2. For New Zealand exporters to the UK etc., they have had to reduce their margins on exported goods to stay competitive. As a result, you can buy New Zealand goods such as wine or Icebreaker clothing more cheaply in the UK than you can in New Zealand. So much for our strategy of delaying purchases until we arrived in the country!

3. And of course, New Zealand business is increasingly looking to Asian rather than US or European markets for future growth, further weakening the links which bind us.

It is a great shame. Tourism from Europe and US is down significantly. Tourism from Japan and China is increasing, but is essentially a different much more packaged proposition, excluding much of the small hotel and B&B market. As ever, nothing stays the same for long.

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