Appendix: New Zealand Macroeconomic Assumptions
The New Zealand macroeconomic variables used in the product forecasts are essentially working assumptions and are not specific forecasts. It is not possible to forecast exchange rates over the medium term because of the large number of variables involved. The macroeconomic assumptions are as at 18 March 2003.
Because of the predominance of primary production for export, returns to New Zealand producers of food and fibre are significantly impacted by movements in exchange rates.
The table below shows the effects of a 10% movement in product-related exchange rate assumptions for 2002/03, except for kiwifruit which apples to 2003/04 as the 2002/03 crop had already been sold. These effects should be treated as indicative only.
Effects of 10% Exchange Rate Movements on Product Prices
Prices |
Depreciation |
Appreciation |
Depreciation |
Appreciation | |
% |
% |
% |
% | ||
Dairy1 |
7 |
-6 |
Kiwifruit5 |
8 |
-7 |
Beef2 |
14 |
-11 |
Apples5 |
20 |
-17 |
Lamb3 |
15 |
-12 |
Wine6 |
11 |
-9 |
Wool4 |
9 |
-8 |
Lumber7 |
11 |
-9 |
1 Farmgate milksolids price (c/kg). The effect is spread over several seasons, with relatively little impact in the short term because of Fonterra's use of forward exchange cover.
2 Manufacturing cow at works ($/kg).
3 All grades average lamb at works ($/hd).
4 Average wool auction price ($/kg clean). As this price is an international price, exchange rates tend to be factored in to buyer decisions.
5 Average total payment per tray for kiwifruit. The higher multiple for apples reflects the lower ratio of grower returns to international prices received.
6 Wine at FOB ($/m3).
7 Lumber at FOB ($/m3).
Contact for further information:
Rod Forbes
Phone: (04) 474 4222
Email: rod.forbes@maf.govt.nz
