By Tony Field
The Labour Party and New Zealand First Party have found some common ground. Labour is supporting New Zealand First leader Winston Peters' plan to lower the high Kiwi dollar.
Mr Peters wants to rewrite the rules for the Reserve Bank so it can do more to help exporters.
The New Zealand dollar has been driven up by overseas traders attracted by the higher interest rates on offer here. Mr Peters says that's hurting our exporters.
“Are we going to back our own people, our own workers, or are we going to run the country for downtown Queen St paper shufflers and overseas money speculators?” asks the New Zealand First Party leader.
His Private Members Bill would broaden the Reserve Bank's role. So instead of focusing on inflation, the Bank would consider other factors like the high dollar and employment when it sets interest rates.
The bill has Labour's support.
“Inflation targeting for New Zealand has passed its usefulness,” says Labour Finance spokesman David Parker. “It was very important at the time to focus solely on inflation, but at the moment we face competitive devaluation abroad. This is hurting our exporters – ordinary New Zealanders who are losing their jobs and leaving to Australia as a consequence.”
But former Reserve Bank governor Don Brash says intervening in the money markets would be expensive and the effects could be short-lived.
“We know when they tried that in 2007 it did not work,” says Dr Brash. “We know in Switzerland it did work, but the Central Bank's balance sheet is now three-quarters of Swiss GDP, and the intervention is costing them billions of dollars a year.”
The National Party, ACT Party and United Future Party oppose Mr Peters’ bill.
While the bill looks certain to fail, Mr Peters has had a win. He has helped put debate over the high dollar firmly at the centre of the political agenda.
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