The New Zealand dollar collapsed Friday night in final New York trading for the week, ending at NZ$1.00 = US$0.5590 This is the lowest close in over five years. On April 30, 2003 it reached US$0.5587.
Against the surging yen, it now only takes 52.80 yen to buy NZ$1. This is another stunning fall for the NZ$ - it was only mid October this year that it took more than 90 yen to buy NZ$1.
New Zealand is one of only a handful of countries that has been in recession for three full quarters now, an 'export economy' with a huge current account deficit. Finally, current account deficits are having real consequences.
European currencies are being hit hard as well. Deficits and negative growth are spuring risk aversion.
For us, the prospect is for highly inflationary consequences while the economy shrinks even further. A world recession will make exporting difficult enough - but it will be even tougher with fast-shrinking commodity prices, and low demand. Unfortunately, we are unlikely to benefit much from lower oil prices - our drooping currency will keep local petrol prices higher that they would otherwise be.
Nine years ago, someone articulated a goal of being in the top half of the OECD by now. Instead, it looks like we may soon claim the bottom spot.
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