Why Emigrate to New Zealand?
If you’re emigrating to New Zealand, the recent drop in dairy prices and the subsequent slide in the New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate could help you start your new life abroad with more money in your pocket.
A temperate climate, spectacular landscape and high life quality make New Zealand one of the world’s most popular emigration destinations. The prospect of better career opportunities, greater scope for outdoor activities and a healthier work/life balance prompted 4,000 people to make the move to New Zealand in 2013.
If you’re considering joining them, the shift in commodity prices which has taken place over the last 8 months could prove very beneficial.
Since February dairy prices have fallen by almost 50%.
As dairy produce is New Zealand’s biggest export, the drop in prices has weighed on the nation’s economic outlook and played a part in the Reserve Bank of New Zealand (RBNZ) pausing its rate hiking cycle.
The fall in the value of the commodity has also seen the New Zealand Dollar come under serious pressure and the currency has fallen against both the Pound (NZD/GBP) and US Dollar (NZD/USD) over the last few months.
GBP/NZD and GBP/USD Exchange Rates Advance, Benefits Expats
Since April the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate has climbed from 1.91 NZ Dollars to brush a high of 2.09 NZ Dollars in October.
While UK disinflationary pressures have since seen the pairing ease back to around the 1.97 NZ Dollar level, the improvement in the GBP/NZD exchange rate could still make a big difference to British expats in New Zealand.
For example, if you had £150,000 to transfer from the UK to New Zealand, you would have received NZ$286,500 back in April. That same £150,000 would now fetch you NZ$295,500 – NZ$9,000 more . That kind of extra money could make a big difference to your emigration.
Similarly, the US Dollar to New Zealand Dollar (USD/NZD) exchange rate has climbed from NZ$1.14 to NZ$1.25 over the last six months.
If you were a US citizen looking to emigrate to New Zealand, the difference in the rate could leave you a whopping NZ$16,500 better off on a transfer of US$150,000 .
Although analysts have recently insinuated that the New Zealand Dollar could be poised for a rally, any further weakness in dairy prices could prevent the currency’s advance. The ‘Kiwi’ could also extend declines if the US Federal Reserve moves closer to raising interest rates – an action which would undermine demand for higher-risk assets.
FTA Could Impact Dairy Market and Influence NZD
The drop in dairy prices has tapered off lately, but BNZ economist Doug Steel is still negative on the commodity’s outlook. He stated; ‘Even though we might see some stability, prices are still weak. We aren’t seeing that improvement in prices, so we still think there’s very much downside risk to milk forecasts.’
However, the dairy situation could improve in the wake of the recent free-trade agreement between New Zealand and South Korea. The new free-trade agreement between Australia and China could also boost dairy trade as New Zealand’s main dairy producer, Fonterra, operates two processing plants in Australia.
That being said, dairy prices are likely to remain depressed for some time, and the Reserve Bank of New Zealand continues to imply that it would like to see a softer domestic currency.
New Zealand Dollar (NZD) Exchange Rate Forecast to Trend Lower
At its latest policy meeting the RBNZ opted to hold the official cash rate at 3.5%. The central bank asserted that the New Zealand Dollar remains overvalued and that the currency is likely to continue its downtrend in the medium term.
The RBNZ stated; ‘Lower commodity prices and increased global financial market volatility have taken some pressure off the New Zealand Dollar. However, its current level remains unjustified and unsustainable and continues to constrain growth in the tradables sector. We expect a further significant depreciation.’
The central bank has previously intervened in the currency market in order to undermine the strength of the New Zealand Dollar and has hinted that it would be willing to do so again in order to bolster the nation’s economic outlook.
If you’re planning to emigrate to New Zealand in the near future, or are already an expat living in the nation and have foreign currency exchange requirements coming up, you may want to monitor the progress of the dairy market and the direction taken by the New Zealand Dollar.
If the New Zealand Dollar fails to resume its downtrend over the next few weeks, the RBNZ may take action to drive the currency lower. If that happens and the Pound Sterling to New Zealand Dollar (GBP/NZD) and US Dollar to New Zealand (USD/NZD) exchange rates advance it could be a good time to transfer your funds overseas. As highlighted above, depreciation in the ‘Kiwi’ may prove to be very lucrative for those looking to emigrate to New Zealand, so monitoring currency trends could leave you much better off.
New Zealand Dollar (NZD) Declines after Dairy Prices Fall
On Wednesday a further decline in dairy prices saw the New Zealand Dollar to US Dollar (NZD/USD) exchange rate shed over a cent while the New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate fell by half a cent.
At the latest GlobalDairyTrade auction, dairy prices fell to their lowest level in over five years.
The slump prompted investors to speculate that Fonterra (New Zealand’s largest dairy producer) will have to revise down its milk forecast.
As stated by industry expert Stuart Ive; ‘There’s plenty of people saying Fonterra will have to be revising down. If farmers are paid out less money then there’s a knock-on effect for surrounding industries’.
The New Zealand Dollar to US Dollar (NZD/USD) exchange rate fell to a low of 0.7858
The New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate fell to a low of 0.5034
