While New Zealand deals with Covid-19, and the road to fiscal recovery is still a long and uncertain one, it’s encouraging to see glimpses of some trade relations starting to pick back up, writes Matt Spehr.
While it may not feel like it, New Zealand is still faring well in comparison to other economies across the globe when it comes to trading – a sigh of relief given the importance of trade with the rest of the world to safeguard our economic future.
What we are learning is that, despite trade being severely impacted by the pandemic, there are various ways Kiwi businesses can keep their heads above water as we continue to weather the storm.
The subtle rebound
About five months since the first lockdown, the Australian and the US Dollars have been the quickest currencies to pick up for businesses in New Zealand – despite alarming numbers of Covid-19 cases in both countries.
Perhaps unsurprisingly, we have seen remittances in these currencies from New Zealand dropped sharply during April 2020. Our team at Western Union Business Solutions had seen payments in the Australian dollar and US dollar decrease. While the US has suffered setbacks, however both have bounced back quickly to almost pre-lockdown levels. In fact, they went back to almost pre-lockdown levels as early as May.
If you’re wondering why, there could be a range of reasons, but we believe it’s largely because a significant portion of USD trading can be attributed to trade with China and South East Asia. This indicates that New Zealand businesses have been quicker to re-commence trade with those regions, as well as our friends across the ditch.
Work-in-progress
Meanwhile, the likes of the EUR and GBP are still struggling to make headway, with both remaining far below pre-lockdown levels. In May and June 2020, data shows that trade in the EUR and GBP was still half of what it was back in March.
A combination of greater Covid-19 volatility in Europe, and supply chain issues – which are plaguing orders from further afield – help explain why Kiwi businesses are wary of trading with this part of the world. A short-term solution appears to be driven by the feeling there is less risk involved in trading closer to home.
Furthermore, the products coming out of the UK and Europe tend to be of higher value (and cost), so cashflow issues with Kiwi businesses and/or invoice payment extensions could also be putting a hold on the flow of money between New Zealand businesses and these regions.
Where to next?
As other markets continue their own journeys, Kiwi businesses should remain extra vigilant to maintain steady cashflow and continue operating with others.
New Zealand businesses (many even through the past few weeks of restrictions) continue to operate and innovate to find ways to reach consumers. There’s a risk that they will not be able to meet a demand for products that continues to grow.
Kiwi businesses will inevitably need to start trading in GBP and EUR again, and it is important that they have the right preparations in place to handle any rises or falls in these currencies, given the unstable global environment. They should speak with their currency provider on the best way forward for them.
Then there’s the issue of customers potentially growing impatient at shipping delays. In these times, this can sometimes be difficult to avoid. Kiwi businesses should keep up the communication with their customers and look to find the most efficient supply chains possible.
Now is the time for business owners and operators to take a look at the options out there, for both their imports as well as their choice of counterparties, to help ensure their cashflow remains as steady as possible.
Matt Spehr (pictured) is NZ head of dealing at Western Union Business Solutions.
