We now see the exchange rate as exceptionally high, and in some respects this is unjustifiable. In time, it will fall. Investors who think that the New Zealand dollar only goes up will be set for disappointment.
The decline in the exchange rate will either be gradual, as domestic spending pressures ease, or it will be more abrupt as global investors reassess New Zealand as an investment destination.
The correction of these imbalances and associated inflation pressures will require a slowdown in housing, credit growth and domestic spending, ... We also expect a significantly lower exchange rate.