PrintNZ CEO Joan Grace says those printers who rely on export companies for business are likely to find that their printing spend diminishes in the short term, and if it continues, perhaps even longer.
The kiwi dollar is likely to push to fresh highs after data showed the Reserve Bank still has not got inflation under control and may have to lift interest rates again next week.
After the release of the consumer price index this week, the kiwi jumped to its highest level since it was floated 22 years ago, rising to almost US75c. It hit a high of US74.93c, above a previous high of US74.65c in March 2005.
Bank of New Zealand currency strategist Danica Hampton, who predicted the currency would go higher still, says the Reserve Bank was expected to raise the official cash rate to 7.75 per cent, making it among the highest in the developed world, and further increasing the attractiveness of Kiwi rates for foreign investors.
Joan Grace says the most widely reported impact of the exchange rate hike itself, is about the impact on NZ’s exporters “who are seeing their hard won market returns fall as a result of something they have no control over.”
“For printing businesses with exporters as their major customers the impact of the rising dollar is immediate. These customers are highly likely to decrease what they spend on print.
“A second scenario to consider is that of a business in our industry that is mostly focused on producing for domestic customers with little debt. The immediate impact is not all that bad – the high dollar is keeping the price of petrol and other imported inputs down, the economy is still buoyant with NZ consumers still pretty keen to spend beyond their means.
“But what will happen in 3-6 months time when the domestic customers also see a decrease in business confidence and consumer spending in light of higher interest rates?” she adds.
“Higher interest rates will have a dual impact for consumers of raising mortgage payments and slowing the housing market making people more uneasy about increasing personal debt.”
Ms Grace says that while the volatility of the NZ dollar is something nobody can control because a poor performing US economy is simply beyond New Zealand’s sphere of influence companies should be ensuring they get the productivity gains that make their products and services more viable on world markets.
They should also be looking carefully at the return on investment they can get and
borrow wisely if they need to, understanding the impacts of higher interest rates.
“It is also a time for the industry to consider again why we set selling prices based on a cost-plus mentality and not on the basis of the value we add to the businesses of our customers.”