IMPACT of DEFLATION Exporters Importers Savers Borrowers Exporters

IMPACT of DEFLATION Exporters Importers Savers Borrowers

Exporters: Positive Impact Exports become price competitive in the international market – more affordable in overseas destinations therefore exports will increase - export receipts increase. New Zealand exporters’ revenue and profitability will increase due to decreasing cost of production in the domestic market

Importers: Negative Impact Imported product is less price competitive than local products therefore price sensitive consumers will purchase local/domestic products in preference to overseas goods. Local goods will begin to make up a larger market share and there will be a decrease in demand for overseas product. As a result importers will find sales revenue declining.

Savers: Positive Impact Deflation will mean that the value of money increases (purchasing power increases) rather than decreases as it does for inflation. Savers would be able to purchase more with their savings than when they initially put their money in the savings account

Borrowers: Negative impact As the value of money (purchasing power) increases during a period of deflation the real value of debt is going to increase. When borrowers are going to pay off their loans, they will find the value of the goods they bought has become cheaper.