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Peters' Reserve Bank bill to be debated

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Peters' Reserve Bank bill to be debated

3News NZ

Winston Peters (AAP)

Winston Peters (AAP)

Parliament is going to debate a bill designed to give the Reserve Bank authority to control the exchange rate.

The bill, drafted by NZ First leader Winston Peters, has been drawn from the members ballot and will go on Parliament's agenda for a first reading.

Under current law the bank can intervene in extreme circumstances but Mr Peters says it needs more flexible powers.

"Everyone, from the International Monetary Fund to local economists, agres our exchange rate is seriously over-valued by about 20 percent," he said on Thursday.

"It is crippling our international competitiveness and severely distorting and damaging our economic prospects."

Mr Peters says the bank's historic role is to keep the rate of inflation between one and three per cent.

"It was legislated for in the 1980s during the time of Rogernomics and rampant inflation," he said.

"While the inflation goal remains important, this bill would provide the Reserve Bank with the flexibility it needs to also promote growth and employment and boost our struggling export sector."

Mr Peters says his bill is a "golden opportunity" to put the economy on a track to prosperity but the Government isn't likely to allow an opposition party to meddle with monetary policy.

The bill will almost certainly be defeated on its first reading vote.

NZN

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Comments

21/08/2012 3:18:28 p.m.

DB wrote:

Ok, no name calling. Firstly, to keep import costs down - invest in your local manufacturing industry, local infrastructure, local processing abilities and local small business developments. For example every week there are tonnes and tonnes of logs being driven from Northland straight to the ports, shipped off, processed and timber brought back to NZ - at import cost. Same with dairy products, same with oil, same with a whole raft of other primary industries that we have in NZ that we are failing to utilise. And wages are only comparatively higher because of the lack of competition and lack of controls and a comparatively skinny market - which would be solved with investment. And why? Because of privatization policies of 20 years ago which prevented the "sound investment" the "money making potential" the "monetary investment" into any sort of local manufacturing and processing industry. Just this last quarter we lost over 10,000 jobs just in the manufacturing industry - and you sit there and ask why it the import costs are so high? How bout we stop investing billions of dollars on roads and instead invest it in the industry sectors that need it. Secondly, if we peg our exchange rate to our major trading partners (which I'm sure your aware is not many), that will both help control inflation and keep some stability with our exports (just as China does - worlds largest economy). What that wont do however, is help stabilise the "borrowing" of foreign currencies which seems to be Nationals answer for NZs debt. And how can you say that we should grow our economy via exports, when the IMF has said themselves our dollar is overvalued, and that the exchange rate fluctuates so much there is absolutely no logic in investing in our export market. You cant have your cake and eat it too. This is the same path Muldoon went down and ended up borrowing 1.7billion(that's in the 80's) in his last month of office just so the economy wouldn't collapse.

21/08/2012 7:44:10 a.m.

Mike wrote:

Again more name calling.

Now I know I went to university, but I sure didn't get a doctorate, so calling me a doctor is a bit much!

Why not address anything I said, as I said plenty.

Libor = London Interbank Offered Rate. Thats a finance rate, and only part of any story. Ian is worried about London more than NZ! Lets look at how NZ is performing in the OECD, and we are performing near the top, hence our stronger currency, and other countries are perfroming much worse, hence global recession. A reduction in exchange rate will flow through to NZ borrowings, and I gave a worst case 20% reduction example on repaying borrowed overseas funds. Banks tend to balance risk and rates, and if NZ starts fiddling with our exchange rate it will raise our interest rates too, but apparently Ian wants everyone owing money to be paying more interest too!

NZ is in difficult times in a world recession so we dont have the luxery of unlimited funds to throw away. Our government spending still exceeds government revenue, although our exports are growing to help fix that.

The best thing for NZ is to grow our exports and economy as only if our exports grow will we really be able to afford even our current levels of social welfare/health/education.

No doubt Ian thinks this is wrong as they probably want a reduction in exports growth maybe? As no earners to pay for welfare is the way forward with left loony thinkers.

Still nobody has addressed the problem of lower exchange rates raising import costs, local costs like buying milk, repayment of borrowing costs, or why other countries with higher exchange rates/wages/transport costs can export to NZ cheaper than we can produce?

When NZ borrows money, it borrows overseas currency, and when the loan period finishes they repay it in overseas currency (or more commonly with further loans). That type of borrowing will see a 20% drop in exchange rate raise repayments by 25%. There are other borrowing ways.

20/08/2012 10:06:28 a.m.

Ian wrote:

Mike the PR spin doctor!!

Mike, ask me this one question: what are the so called national conservatives doing about 'Libor Rate'?

NOTHING!

Keynesian economics has failed the globe

18/08/2012 2:59:23 a.m.

Mike wrote:

I see the name calling is back vs debate any policy.

Please explain how 20% lower dollar can do anything but raise milk and petrol prices 25%!

Also look at NZ debt.

Take say $200,000,000,000 with a 20% lowering of the NZ dollar and it will require paying back an additional $50,000,000,000!

Who will be paying this? I bet it wont be Winnie!

If I'm wrong, please explain how overseas borrowings in foreign currencies wont increase with a reduction in NZ$ value?

You can learn this stuff in 3rd form macro economics, as even the most basic economics courses like 3rd form include currency effects. Myself, I took economics to graduate level, so I know a bit more than average, maybe even took it at university to a higher level than Winnie?

The reality is in the last 3 years of recession we have had over 11% growth in exports even with a strengthening dollar, while Labour in 2000-2005 boom years and a weakening dollar had 5% growth in 5 years. For all the bullshit, Keys doing quite well for NZ in difficult times. That 11% gorth in exports durign recession has saved thousands of jobs, and makes NZ dollar perform better than likes of the US$ and the Euro which are economically performing badly.

16/08/2012 8:14:30 p.m.

DB wrote:

I was waiting for you MIKE. I have already told you that there are other initiatives that will accompany the plan. Stop thinking so 1 dimensional like your other right wing mates. New Zealand is not a bank, nor is it a business. This is a country and should be run like one. Stop coming on here and trying to scare people into thinking that currency shifting and usury are the only way forward. Just think for a second. Do you actually think Winston is that stupid as to not have thought of the exchange rate change causing "2 ltr milk price of $4"? Seriously. Who are you trying to convince? Don't forget that Winston was once the Treasurer of this country and knows what he is talking about. He wouldn't be setting himself up for failure - as it seems you are convinced he has done. You see, the difference between Winston and John Key, is that Winston actually wants a positive future for all NZers. John Key wants to ensure a positive future for him and his cronies. I would suggest, MIKE, that you sit back, wait for Winston to debate his bill, listen and learn. Then we can carry on this discussion. Because then you will actually have some FACTS to talk to us about - not just hypothetical innuendo.

16/08/2012 5:32:53 p.m.

Mike wrote:

Lets have some effects of a 20% lower dollar.

eg the price of petrol would jump around 55 cents/ltr with a 20% lower dollar. Peters wants NZ paying more for just about everything.

Take the price of Milk. That is based on international prices, so a lowering of 20% in the NZ dollar would also lead to an increase in the price of milk.

A 2 ltr of milk is around $4.00, and Peters would like to see us having to pay $5 for the same 2 ltr!

How will this help NZ?

The reality is NZ manufacturing needs to do better. Eg we still import woolen carpet from Aus with its higher dollar, higher wage rates, and additional transport costs. It should not be possible, yet our own manufacturig is such a mess and disorganised that Aus can still export carpet to NZ profitably.

The reality is the world recession has the world in such a mess, our dollar value reflects this. The US/EU currencies have lower values than they had, and yet they still have higher values than the NZ$. We still pay more than 1 NZ$ for 1 US$ or 1 Euro.

Our 2 biggest trading partners have experienced more currency growth than NZ, China/Australia as economically they are out performing NZ, and the currency changes show this. If exclude mining, NZ is actually doing better than Aus, but we have a heavy opposition to all things mining.