The standard rule of thumb says that each UK pound is worth about $3 NZ.
We were fortunate to be living and working in the UK in 2001, when the terrorist attacks in the US caused the exchange rate to jump around a lot. At the start of September 2001 each pound was worth about $3.30 NZ, and by the end of that month it was consistently over $3.60 NZ. It peaked, on the 2nd of October 2001, at $3.64.
Needless to say we sent home all of the money we could, which was not as much as we would have liked.
Even when we came back to NZ in 2004 the conversion was still above $2.80 per pound.
However, that is a story from another time.
Here is what has happened recently:
In fact, as this graph shows, the rate has hardly been over $3 at all in the last five years:
Last time the exchange rate was at this current level was in June 1984 (when I was 8 years old!)
What if a pound is worth just $2 NZ? Is that a good thing?
It’s definitely not such good news at all for those kiwis in London hoping to bring pounds back with them, or those companies working hard back here to sell into the UK market. And it’s also more expensive for UK tourists and immigrants to spend money here in NZ, so we should expect them to spend less.
So, who wins under this scenario?
I wonder how long the exchange rate needs to stay at these sort of levels (or perhaps even lower) before people stop assuming a $3 value?
when I moved to NZ a quick comparison of prices led me to the conclusion that 2-1 was closer to parity (things that cost 1GBP cost about 2GBP at the time)
I’ve not done the same comparison recently but the trend towards 2-1 is closer to parity in terms of what things are actually worth in both countries and makes wages actually pretty similar. IMHO
O
Techies my age seem to have been screwed all over our careers.
Graduated in the wake of the Dot Com Bubble; depressed wages, no jobs.
Worked hard for a few years moving from crappy junior pay to more respectable Intermediate Dev pay. Great, though you’re getting old now, don’t forget to do the OE!
Move to London, Bam! Recession. Depressed wages, no jobs.
Work hard for a couple of years moving from intermediate dev up to more respectable Senior Dev pay.
Now the £’s almost 1-to-1 with the Euro, and the NZD’s worth a 3rd of what it was, NZ house prices are pretty much still at their unattainable peaks… fuck it, let’s go be bicycle couriers or something fun and outdoorsy.
> Techies my age seem to have been screwed all over our careers.
Adam (and Nick) –
There is nobody conspiring against you, I don’t think. But, you’re right about the timing.
London does seem to be one of those places where the job market is running very very hot, or very very not. Another part of the story about 2001 that I didn’t mention was that I spent about 6 weeks after September 11 trying to find work, which was not much fun and doubly frustrating given the exchange rate at the time. As it happened we were flatting at the time with two cycle couriers. There are always other options.
I agree with Adam, tho I managed to get out of Uni earlier than the first .com bubble, and I mostly availed the crap junior jobs by going to work for a then startup (Glazier (auckland)), then a big multi-national, then a start up… etc.
(of course, I would – I sit across a desk from him here at the BBC).
2:1 sucks at the moment, but I doubt it’s going to last all that long. It’s likely to head back to 2.50:1, being the GBP is so very weak at the moment, and I dont think there is a lot of chance that it’s going to pick up a lot, given the quantitative easing that’s gone on (read: government printing money).
Just wait until the inflation kicks in. I hope it’s not until next year when I’m gone…..
BTW, same thing in the US – esp as a lot of the oil countries stop using USD as the default trade currency and move to the Euro.
With the GBP so weak, gone are the days of taking your car to France to get booze, which has basically turned Calais into a ghost town. It’s cheaper in Tesco now…
You guys can certainly moan like poms. But seriously, it’s an opportunity people!
Pick the bottom, back yourself, and get as many Kiwi dollars into your UK bank account as you can when it hits it.
Like we were all doing with the USD a couple of years back…
–
Who wins? I’d say the UK economy… in the medium-term.
Their exports are now more affordable… and imports more expensive. Sound just like the kind of conditions that Dr. Bollard is/was praying for, for NZ.
Also the same conditions Argentina has endured since their economic crisis in the early 2000′s. Focuses the economy on exporting and import-substitution and gets your terms of trade under control.
Johnny: yup, thats the idea. Infact, I think we are putting a transfer over in a day or 2 :)
We’re all currency speculators now, eh?!
I think we proved rather succinctly we are a nation of currency speculators during the ’84 constitutional crisis :)