New Zealand Manufacturing and Exporters Association chief executive John Walley said yesterday the overvalued exchange rate had cost exporters $10.4 billion over the past three and a-half years.
The association was calling for action on the exchange rate to prevent further losses.
In February, the New Zealand dollar bottomed out on the trade-weighted index (TWI) at 52.3. But since then currency manipulation overseas, and inaction in New Zealand, had seen the TWI rise to 72.9 last month. The TWI is a basket of currencies from New Zealand's major trading partners.
For every 1% the currency rose, it cost New Zealand exporters about $200 million on an annual basis, Mr Walley said.
Between February 2009 and August this year, the dollar rose 20.6% and it had averaged 14.8% above the February level during the period.
"It is no wonder that we are seeing job losses in coal and aluminium with a statistic like that. To put this in perspective, New Zealand's total annual merchandise exports are around $45 billion, so this is a hugely significant number compared to the margin on those sales," he said.
The dollar is likely to rise later this week when Reserve Bank governor Alan Bollard delivers his final official cash rate decision on Thursday.
The dollar traded yesterday at US81.04c, down from US81.21c at the close of trading in New York on Saturday.
Interest rates are driving the currency's rise.
At 2.5%, New Zealand's official cash rate is relatively high compared with that of other major countries such as the US (0.25%) and Japan (0.1%).
To buy New Zealand's bonds, traders have to use New Zealand dollars, forcing the value up.
Currency trader Nick McDonald told The New Zealand Herald things could get much worse for the country's exporters. He was picking the kiwi to reach US90c in the next 12 months to 18 months.
He would not be surprised if the currency reached parity with the US dollar in the next four to five years.
If the kiwi was to reach US90c, it would beat the post-float record of US88.43c it hit in August last year.
Mr Walley said claims nothing could be done to manage the effect of the exchange rate were only true in the context of the chosen macroeconomic framework - there was no alternative.
However, there was international evidence from countries such as Switzerland, the United Kingdom and the US that efforts to control exchange rates could and did work.
"Overhauling our economic framework with a focus on a balanced current account is long overdue. We must use whatever means necessary. Strategies used around the world have demonstrated there is no lack of means, what is missing here is the will," Mr Walley said.
The latest BNZ Confidence Survey, released yesterday, showed concern in the agricultural sector about the high dollar and some easing in international prices despite the US drought.
