This article was published on 3 May 2008. Some information may be out of date.


  • Measuring movements of the Kiwi dollar against the US dollar can be quite misleading.
  • Last week’s boss responds to my response to him!
  • KiwiSaver tough on small businesses.
  • Many reasons to use Indian labour rather than NZ labour.
  • NZ workers not so bad.

QI’m getting tired of people quoting our exchange rate against the US dollar as evidence of our high dollar — as a reader did in your column recently.

It’s more that the US dollar is dropping against all currencies, and the US is not our major trading partner and becoming even less so.

Couldn’t the media quote the Trade Weighted Index (TWI) as the major measure for our dollar? Not as sexy as the US dollar rate but far more relevant.

AThe media certainly could — and should — quote movements in the TWI more than the US dollar. And you’re right — that would paint a different picture.

I suspect the reason we don’t use the TWI much has less to do with sexiness than ease of understanding. So let’s start the education now.

The Trade Weighted Index measures the value of the kiwi dollar relative to the currencies of our major trading partners. However, since the Euro was introduced in January 1999, the weightings in the index no longer simply reflect how much trade we have with each country.

They also take into account the size of each economy. This is because changes in the growth rate of other economies affect growth here — mainly through demand for our exports. And the bigger the economy, the more that matters.

That means that, even though the US is not our biggest trading partner, movements in its currency still have the biggest effect on the TWI, with a weighting of about 32 per cent.

That’s followed by the Euro at about 26 per cent, the Australian dollar at 19 per cent, the Japanese yen at 17 per cent and the UK pound at 7 per cent.

Since January 1999, the kiwi dollar has risen against all of these currencies. True, it has barely changed against our major trading partner, Australia. But over all, the TWI has risen a considerable 24 per cent.

Nonetheless, this is much less than the 47 per cent leap in our dollar against the US dollar over that period.

And recently, from mid-April 2007 to mid-April 2008, your point is even more valid. The kiwi dollar grew 7.7 per cent against the US dollar over that year, but it fell against the Euro, Australian dollar and yen. The total effect was a 1.4 per cent drop in the TWI.

QYour comment regarding my letter last week, “…you could try the generous approach? You might be surprised at how it could transform incompetent whingers,” underpins the very issue I have with KiwiSaver. Will giving someone extra money transform incompetence into competence? Competence is surely achieved through application of effort.

When an individual joins KiwiSaver, regardless of your assertion that the government subsidy compensates the employer, in the long run an employer is required to contribute over and above a salary — subsidising the employee for their retirement.

Salary increases should happen in tune with an economy, the business cash flow and as a measure of individual productivity. The government, however, has made it very clear that KiwiSaver is on top of salaries and that an employer does not negotiate a salary down to offset the costs of the contribution.

You talk about KiwiSaver as an act of generosity as regards the employer’s contribution. However, a KiwiSaver contribution is anything but. Acts of true generosity are made voluntarily.

What are we teaching people with the likes of KiwiSaver? That when they get into financial strife someone will assist them (in fact it is almost like they are being rewarded), with no extra effort required on their part. This is not teaching people to be accountable for themselves.

We teach a young person that when they leave university, the employer will manage their Study Link repayments. The employer will pay their taxes for them, find a substitute if they go on maternity leave and give them four weeks’ holiday. An employee knows that an employer has great difficulty in letting them go, even if there is no work. And now, the employer will assist in paying for their superannuation.

The benefit to the country of having KiwiSaver start to claw back on the overseas deficit will be diminished by the fact that it continues to foster a value system which is unsustainable. It does not address the underlying issue that got us into this mess in the first place, that people have great difficulty exercising self control with their finances.

There are certainly those who need a hand up the economic ladder, who cannot make it on their own. I take full responsibility for assisting people in this regard.

AYou’re much more reasonable this week! What you say about the messages sent by KiwiSaver might be true for some people — although there’s room to argue that another message might be: It’s worthwhile to save.

But I’m not going to leap in and defend KiwiSaver as good policy. I have many reservations about it. All I’ve ever said is that the scheme is here, so each individual might as well get their fair share of it.

In response to some of your specific points:

  • Employees who feel appreciated will be more inclined to use whatever competence they have.
  • While employers are not allowed to cut someone’s pay to cover their KiwiSaver employer contribution, future pay rises are sure to be smaller because of KiwiSaver. The government doesn’t deny that or oppose it.
  • The generosity I wrote about was employers making bigger KiwiSaver contributions than they legally have to. That is voluntary.

QYour correspondent last week seems to have the same troubles that I do with KiwiSaver. If the money is eventually coming from the Government, why does it need to involve me in extra bookwork?

Small business in New Zealand is swamped with Government “good ideas”. If you have a large business you will have dedicated staff for compliance etc. As a small employer I spend my time trying to earn money, but I am subject to the same regulatory demands as a large one.

AGood question. I’m sure the government could have achieved a similar result with fewer demands on employers — if there had been time to think it through.

While the UK government is currently spending several years considering retirement savings changes, our government spent a few months — and then made radical changes six weeks before the scheme started. No prizes for working out why the haste.

As you say, businesses of all sizes end up being hurt — which in the end means everyone ends up being hurt.

QYour recent comment about a particular company being pleased to use KiwiSaver as a means for recruiting people is a sad indictment on the state of HR in this country. They are basically offering a higher salary as a means of attracting staff. Good staff must be hard to find.

In my 20 years in business, I have found graduates are horribly unqualified, due to competition for the education dollar and a relaxing of the criteria for entry. Furthermore, most employees arrive via recruitment agencies, at great expense to the employer.

Accounting and legal firms, medical practitioners and many others are looking at recruitment offshore for their processing work. We will definitely do the same, moving much of our work to India.

This has many advantages:

  • We are not bound by New Zealand employment law. This is a very big plus for the small to medium size business.
  • We are not lumbered with compliance costs.
  • We do not have to adjust our cash flow to contribute to KiwiSaver.
  • It is necessary to educate immigrant workers in New Zealand with regard to the local market, so it is no different to educating someone in India.
  • We can moderate the workforce to match the ebb and flow of cash flow, rather than bridge staff costs until new projects come in.
  • The HR costs offshore are cheaper and the people are hungrier for work. Their skill levels are high and if they underperform we simply find someone else.
  • It creates a platform for new work opportunities offshore.
  • We can reduce the size of our physical office space here, thereby cutting our expenses.
  • Mostly, I like their attitude. They don’t have their hands out as staff do here, who seem to think that they should get an increase in salary simply because they have been with a company for another year.

I choose to reward my staff based on their personal responsibility, their aptitude and their willingness to learn.

AYour first paragraph astounds me. Of course companies use higher pay to attract staff. While earning money is not the only reason people work, not many employees would turn up next Monday if they weren’t paid. And — if they are choosing from several job offers — the more money, the better.

Beyond that, your list makes thought-provoking reading. Given that New Zealand has full employment, perhaps it’s no bad thing for you to use Indian services. If they perform as well as you say, that will boost your profits, maybe enabling you to grow and employ more New Zealanders in other jobs — if you can bear to hire us for anything.

Not every New Zealand employer has your attitude. Read on.

QI cannot believe the “boss” who wrote to you last week still exists in the 21st century. Almost all sensible countries have a similar scheme and a similar recompense from their governments.

Please, boss, go offshore and when you wake up to the realities of 2008 life, hopefully you will remember the grass is not always greener on the other side of the fence.

I may be old and stupid but I do believe that the majority of Kiwi workers are good honest hard working people trying to advance themselves in what are difficult times worldwide.

For the record I employ staff in Australia and Indonesia and I will be doing it again in New Zealand shortly.

AI don’t know about your age, but you don’t sound too stupid to me.

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Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.