Key: Greens' money plan 'pretty wacky'

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Key: Greens' money plan 'pretty wacky'

3News NZ

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By 3 News online staff / RadioLIVE

Prime Minister John Key has dismissed the Green Party’s proposal for the Reserve Bank to print more money to reduce the value of the New Zealand Dollar as “pretty wacky”.

He says it’s a dangerous move that could create a financial crisis in New Zealand.

"If printing money made you rich, Zimbabwe would be the richest country on the planet, and it's not,'' he told TVNZ's Breakfast.

"They could create a crisis for us, but we don't currently have one.”

The Greens yesterday called on the Reserve Bank to create more money to purchase earthquake recovery bonds to cover the costs of a Christchurch rebuild and top up the natural disaster fund of the Earthquake Commission.

"The global financial crisis has changed all the rules and National's doctrinaire approach is no longer serving our economy well," says Green Party co-leader Russel Norman.

"We're proposing that the assets they should purchase are earthquake recovery bonds issued by the Government, which means the Government has to borrow less from overseas, which reduces the pressure on the New Zealand Dollar."

Labour have backed the Greens plan, with Finance spokesman David Parker saying his party can see some merit in the scheme, known as 'quantitative easing' .

Mr Parker says the Reserve Bank, which has inflation control as a priority, needs its target broadened - which could be done within current legislation.

Mr Parker doesn't want as direct an intervention as the Greens, but it does want to see changes made to the Reserve Bank Act.

"At the moment the Reserve Bank gives primacy to inflation targeting. Their target needs to be broadened, and they need to have responsibility for the over-valuation of the New Zealand Dollar as well. It should not be trumped by inflation targeting."

Mr Parker says exporters are hurting, and the Reserve Bank should be given the power to address that.

Critics say quantitative easing will push up prices, but Dr Norman says it's better to work on getting the dollar down today, than wait for the "inevitable sudden correction and the severe shock that will entail".

Economic Development Minister Steven Joyce rejected the Opposition's call.

"They then want to abandon sensible monetary policy and whack up the cost of living for every New Zealander, and they want to pay for the Christchurch rebuild by printing money."

3 News / RadioLIVE

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Comments

9/10/2012 11:38:48 a.m.

Mike wrote:

What next, will the Greens suggest NZ govt 'invest' in Nigerian Lotteries?

Or can do as Labour did, direct ACC/Kiwisaver to invest in crooks like Maddoff that lost NZ $29 billion pre-election 2008.

We can't change the world. All we can do is look to ourselves and how to protect the NZ economy. Printing money wont protect the economy and will see house/rental prices skyrocket. We will also see fuel prices and all imports jump in price.

What about NZ production? Well contrary to the idiots wearing Green, our exporters set local prices based on export prices, ie what NZ produces will jump in price if we devalue.

This leaves our wages. While Labour Greens calling for higher min wages, their policies would lower our real wages from likes of $13.50 min wage to around $10 curent buying power. and then when the problem isn't magically fixed, they will print more money to lower the buying power further! This is the standard runaway inflation model that has failed economies around the world. As the situation worsens, they decided to print more money to pay people, but the value is lost in inflation and actually worth less. It also pushes income earners up to higher tax rates through inflation, so they pay more % income tax.

9/10/2012 7:35:49 a.m.

Its Happening wrote:

The US are printing money at $45Billion a month, Did John Key say to OBAMA "Hey man your crazy".? The truth is WE will get smashed because the US is crazy.

8/10/2012 9:20:35 p.m.

Finn wrote:

I have researched this for years. Let's make it simple:

The economy functions best when the money supply is sufficient to keep importers and exporters in balance (people are not losing jobs, and overseas goods are affordable). This maintains internal productivity. But if the money supply falls (deflates) or rises (inflates), the balance is lost. It gets messy. Global commodity prices are falling (we loose jobs). The banks take out 14 billion since 2008 (we loose spending power, then businesses cut jobs). The Greens have studied the literature on neoclassical economics. They are correct. We must balance the money supply. Key and the Nats don't want this because they are neoliberals. They like an overvalued NZ dollar because it's good for the rich investors ... but it will keep killing productivity.

Also, issuing debt-free money to pay for Christchurch instead of borrowing from foreign bankers does not increase the money supply. It just reduces debt. This is an old idea that works, but which the bankers have stopped.

8/10/2012 6:11:11 p.m.

AKLCrusader wrote:

Unlike Greece et al - at some stage we will want to pay our debts back. We need a high exchange rate to do that.

Devaluing our currency through inflationary actions means that we have to earn even more NZD to pay back the USD debts.

Also, once we have a lower currency, the farmers will be very happy (and rich) - but everything else has such a high imported component (incl. fuel) that everyone else will be far worse off.

This is a sign that neither of the major "opposition" parties understand the intricacies of a global economy. We are being affected by global weakness which we cannot control, but at least we are not in freefall like others.

Working in an environment like this is hard and it makes businesses be tougher to cope, but the survivors are very strong for the future. This is where innovation is really born - necessity.

Spending more money is not an option at the moment - the printing presses can't fix all ailments - the US and Europe are finding this out now.

8/10/2012 4:34:44 p.m.

TWE wrote:

The Greens have completely lost the plot. Printing money will destroy the value of people's savings (maybe that's what they want?) and just because other countries are doing it doesn't mean we should copy their foolishness.

8/10/2012 4:17:11 p.m.

Chargone wrote:

i can see where the greens are coming from, but it seems like a bad idea none the less. still, it's not like National's come up with anything better. problem is, everyone's obsessing over exports. reality is, exports are used to pay for imports. anything over and above is a bonus that, while it represents a cash gain, is actually a material LOSS to our economy. the first priority should not be increasing exports, but reducing Imports by increasing local production (which, to be fair, doesn't so much reduce imports as change them, but there's a whole causality chain going on there...) ... which, as a side effect, tends to spawn more exports to cover any increase in imports due to new demands. and the vast majority of those transactions then happen Within NZ's economy, making it bigger and less vulnerable to external vagaries. if the NZ dollar is high, would it not make sense that that would be the time to import the things needed to set up manufacturing so as to reduce how much needs to be imported when it's low? ehh, i'm not explaining this very well. point is: Export over and above import is a low priority, and if you're importing too much stuff, crippling your internal economy to export more doesn't fix the problem, just raises how much needs to be imported, perpetuating the cycle. local production wherever possible lowers imports (relatively speaking) and increases exports. it might drive prices up some in the short term, but in the long term it's more people with more money in their pockets spending on more things strengthening the economy ( and increasing the tax take, some of which can be used to take the pressure off where such a transition causes hardship.)

8/10/2012 2:30:37 p.m.

eddie wrote:

C'mon you leftie eye patch wearers. If National came up with this 'idea', you would all be marching in the streets because it's that's it's against the poor (as petrol will rise substantially as well as day to day prices as the NZ$ will be worth less), but since it's Greens/Labour saying it...it's not a factor?! WTF!. You guys really should look in the mirror sometime, ANY policy national even speaks of, let alone implements, is put under microscope by all you lefty posters as well as the opposition and If ANY person is worse off that belongs to the 'poor' it's ridiculed, but this is agreed by most of you!...THIS shows why left voters agree with any policy from the left/opposition..sad sad people. But if it's the left making the poor poorer is OK!? lol

8/10/2012 1:56:41 p.m.

Jim Seaview wrote:

QUOTE: "Labour have backed the Greens plan, with Finance spokesman David Parker saying his party can see some merit in the scheme, known as 'quantitative easing' . Mr Parker says the Reserve Bank, which has inflation control as a priority, needs its target broadened - which could be done within current legislation." WHAT FORWARD VISION from both Labour and the Greens - to hold Greece and Zimbabwe as countries for NZ to aspire to. Both parties should join together and become the "OSTRICH PARTY" as they both have their heads in the sand. At least from this outburst we have found out what "quantitative easing" really stands for "printing Money". They could supply every household with a printer and we could all print our own!!!!

8/10/2012 1:20:52 p.m.

crazy wrote:

it is a stupid idear, lets think about it for a second. america is doing it right now, back b4 the great depression they did the same thing, and it failed. in 1920 there was another crash, but they let business go into default and they bounced back quickly. quantative easing does not work, and if america continues on this path we will face another great depression.

8/10/2012 1:16:17 p.m.

Andrew wrote:

Another hair brained scheme by the Greens/Labour parties which simply would not work and would cause further trouble for the average NZer. Higher interest rates on Mortgages etc, higher cost of imports like fuel,household appliances, cars etc. What we need for all NZers is much higher productivity, less spending and more savings. So get on with it !