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Government rules out dollar devaluation

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Government rules out dollar devaluation

3News NZ

Finance Minister Bill English (Photo: Jared Mason)

Finance Minister Bill English (Photo: Jared Mason)

By Peter Wilson, Political Writer

The Government is ruling out devaluing the dollar, saying there would be a catastrophic drop in living standards.

Opposition parties and the Manufacturers and Exporters Association are demanding action, saying the high exchange rate is crippling companies which can't compete on the international market.

Finance Minister Bill English told Parliament on Tuesday the Government was aware of the "discomfort" caused by the exchange rate, but he didn't agree with the Manufacturers and Exporters Association's call for the dollar to be devalued to 60 US cents.

"That would amount to a 25 percent devaluation and an exchange rate against the Australian dollar of just 58 cents," he said.

"There would be a drop in income and living standards, across the board, of about 20 percent - and if they think there's a gap between us and Australia now, that would widen into a chasm and thousands of New Zealanders would be leaving for Australia because of its much higher standard of living."

The dollar opened on Tuesday at 80.83 US cents after an unexpected drop from 81.16 cents on Monday.

There have been reports that it could reach a post-float record of 90 US cents in the next 18 months.

Labour and NZ First say if that happens thousands of businesses would close, and they want the Reserve Bank to be given extended powers to intervene and bring down the dollar's value.

Prime Minister John Key has previously said intervention doesn't work and the Government has rejected calls for changes to the Reserve Bank Act.

NZN

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Comments

12/09/2012 5:00:35 p.m.

Ulhas wrote:

NZ manufacturing companies must concentrate on improving productivity , innovation , research as we have lots of talent availlable local and migrants to use for our advantage. Kiwis need to have broader outlook and focus on business so that it can be globaly cometitive.
Govt intervention in currency market can make our manufacturing and export sector comfortable and rich at the cost of average Newzealander's standard of living . Most commoditities including dairy, fruits and vegetables prices will be out of roof.

If this idea goes through NZ is sure to get listed as poor country in the region.

12/09/2012 3:10:38 p.m.

Greg wrote:

Dont drop the dollar just challenge the banks seeminly sovereign right to create money through debt then lay all the risk on the brorrer while the banks can claim both property and the debt still exists. We really need some serious reform of our bankruptcy laws. Our living standards are already falling along with our wages. Devaluing the dollar wont be a magic bullet to lift the economy it will drive us under.
Raise wages instead that would be better for everyone, wage raises no longer impact on inflation, its a lie they do.

12/09/2012 8:17:24 a.m.

Jacob wrote:

As if the government can do anything..... The banks are private institutions that control all aspects of the corrupt, enslaving fractional reserve money system. The government is an illusion of control, they know that, and serve as nothing more as false hope that through them things will get better.

11/09/2012 10:44:30 p.m.

robbie wrote:

Will the opposition do it when they get in-that's if they ever do with a crazy policy like this.The average family would not be able to afford anything imported and in this country that's most things

11/09/2012 8:06:12 p.m.

paul wrote:

a strong dollar is a reward for a well preforming economy, the banks need to let the markets determine the price of money and not interfer! schiff radio dot com and you might learn something!

11/09/2012 4:52:55 p.m.

Mike wrote:

Let me get this straight?

The opposition are claiming that because the US is in such dire straights its currency is going down, and they want to pin NZ to a sinking currency, but to sink faster than a sinking currency? So if the US currency falls another 50% lower they want us to follow? So if the US all decided to jump in a lake and drown, the opposition would want NZ to follow?

The NZ currecny is still weaker than the US/EU/UK/Japan/aus currencies - so we still have basically cheaper manufacturing here by currency than in those overseas countries - if the unions would stop putting the knife into businesses and trying to kill them!

We need NZ to think smarter, work harder, not just want everything handed to them. Our high-tech manufacturing even with our strengthening dollar is experiencing growth, as is Fonterra who is working at adding value to NZ exports, ie less raw product being sold and more processed products. Why are our other manufacturing not learning from our better performers?

Talleys is showing NZ fishing can still catch and process fish with NZrs and at a profit. Compare this to the Labour/Iwi/Sealord/Union sellout which saw NZ jobs go for the worst fishing practises money can buy!

NZs ave wage/min wage/welfare levels as measured internationally have actually improved with out strengthening dollar, and the opposition want to throw those gains away?