Research by Westpac economists shows over time, the exchange rate has helped rather than harmed commodity producers. The bank’s economists say the Kiwi tends to move in the same direction as world prices for NZ export commodities.

This limits the hurt for commodity exporters’ when world prices fall, though it also limits some of the benefits when prices rise. Example: The bank’s research shows over 2008 the commodity price index fell 24% in world price terms but the NZ dollar fell too so by the end of the year, the index was unchanged from the start of the year in NZ dollar terms.

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Westpac says over the past 17 years NZ’s export commodities were 25% more volatile in US dollar terms than in NZ dollar terms. The bank says currency union with Aust wouldn’t have helped either - If we had had the Australian dollar volatility would have been 33% higher. The exchange rate has also helped flatten out some of the swings in world oil prices. Westpac says since the early 1990s, oil has been 20% less volatile in NZ dollar terms than in US dollar terms.

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