Looking westward

A trans-Tasman trading bubble won’t cure all our economic boggles

The idea of an economic ‘bubble’ between New Zealand, Australia and potentially more Pacific Island nations presents exciting opportunities for some sectors, but we must be clear that it is not a cure for the entire economy.

Many key export industries, such as manufacturing, will still be affected by the slowdown in global growth.

Businesses should act now to get their plans in order

Traditional ways of operating could change significantly, particularly for sectors that rely on the movement of people, such as travel and tourism and hospitality.

It’s these sectors that will harness the biggest opportunity from a trans-Tasman bubble.

With a decrease in domestic economic activity, businesses that have usually only traded within New Zealand may want to consider the opportunities that trans-Tasman trading may bring them.

However, if not prepared, these companies may also risk losing significant amounts of money and/or customers by not having suitable options in place to deal with foreign currency and exchange rates.

These companies will benefit from talking to a foreign exchange provider to find out more about what this entails and to work out the best solution for them.

For example, tourism operators usually operate with bookings made well in advance. If you’re pricing in NZ dollars, and the NZD strengthens, you may lose tentative bookings as they might suddenly become too expensive for an Aussie traveller.

However, if you set your price in Australian dollars, you could lose out significantly if the exchange rate changes. There are ways around this, but it’s crucial for business operators to start having these conversations now.

Trading further afield

Businesses that are used to trading with countries further afield may find dealing with Australia offers more stability and l ess volatility than the currencies of China, US and Europe.

This will also be true for some Pacific economies with close links to Australian and NZ currency. Other Pacific nations with connections to the US currency will be more volatile and create further risk.

Looking ahead, closer bonds between NZ, Australia and the wider Pacific can only lead to greater connections in the long term.

As we begin to travel and trade more, the opportunity to grow business between countries within the ‘bubble’ will increase as time goes on. This creates a solid foundation for the broader COVID-19 rebuild.

By Steven Dooley
Steven Dooley is an APAC strategist at Western Union Business Solutions.

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