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Rein in the dollar, opposition tells Govt

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Rein in the dollar, opposition tells Govt

3News NZ

The dollar opened on Wednesday at 81.46 US cents, falling more than half a cent overnight

The dollar opened on Wednesday at 81.46 US cents, falling more than half a cent overnight

The New Zealand dollar is dangerously over-valued and the Government must take action to bring it down, opposition parties say.

The dollar opened on Wednesday at 81.46 US cents, falling more than half a cent overnight after Prime Minister John Key said one-way bets on its continued strength were "not a very smart thing to do".

Labour's finance spokesman, David Parker, says trying to talk it down isn't enough.

"Our exporters are cutting jobs and shutting down because they can't compete against low overseas exchange rates. We need to take action on the dollar," he said on Wednesday.

Mr Parker says Labour's policies would work - pro-growth tax reforms to take the pressure off the dollar and a new Reserve Bank Act allowing it to focus on exports.

"It was written in a time when the main economic threat was inflation, now the threat is stagnation," he said.

NZ First leader Winston Peters says New Zealand has become a haven for "hot money" chasing high interest rates.

"This is what they call the `carry trade' where speculators shift money around from low yielding currencies and invest in higher yielding currencies," he said in a speech to the Marlborough Chamber of Commerce.

"As our dollar flits about way above tolerable levels the question is how long are New Zealanders prepared to stand by in a straightjacket or orthodoxy, paralysed from doing anything about it."

Mr Peters says his party has prepared legislation to give the Reserve Bank the flexibility it needs to promote growth, employment and exports.

NZN

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Comments

16/08/2012 12:54:14 p.m.

Jan wrote:

All I have to say is "thank goodness we have the Govt we have running the country,god knows how things would be if otherwise.
I think that Parker and his team need to study economics.

9/08/2012 8:32:47 a.m.

aiden wrote:

the kiwi is actually undervalued at the moment, but lets talk about what bringing the dollar down will do. The first thing people will experience is an increase at the pump, it will then be passed on to everything, from food, to electricity. If we had the dollar where Labour want it to be we would be breaching $3 a litre for petrol. It would also help if labour realised why our dollar was high now and the fact that it has everything to do with the collapse of overseas currency and little to do with NZ. I more than expect the kiwi to go dollar for dollar with the greenback and surpass it.

9/08/2012 8:24:41 a.m.

Mike wrote:

@Nigel good points.

Take Summit Wool spinners, and Norman Ellison Carpets (part of Cavalier group) which are into spining for carpet manufacture, particularly wool carpets. They tell us they are reducing manufacture and cutting jobs due to a high dollar. Well the flooring industry has been being squeezed for the last 30 years (and seen about a dozen players fold, eg Feltex Carpets) as tastes change here in NZ, so that has affected manufacturing. Wool prices are up, which has been pushing wool carpet prices up, and a higher dollar means the price for NZ wool carpets is effectively higher right?

Well all that is true. But our imports of Australian wool carpets continue, and Australia has higher dollar value than NZ, plus their wages are higher, and they have added transport costs - and with all that, they can still afford to export to NZ? Obviously its much more than our dollar value, and yes NZ manufacturing needs to get off its backside and operate better! If Aus can make cheaper carpet with higher wage/dollar/transport costs, something is very, very, wrong! Almost all our complaining manufacturing is like this.

Now I know Norman Ellison Carpets was looking into China manufacturing 20 years back, that is one solution. Talleys here in NZ has its own fleet and employs NZrs to process its catch while Iwi controlled quota is flogged off to the worst working conditions and worst compliance of NZ fishing laws! Which is better for NZ? Talleys who doesn't like unions, or Iwi who finds it okay for workers to be not paid, assualted, even sexually abused, and for the boats fishing to ignore NZ regulations. I'll pick jobs here in NZ every time and to work with businesses like Talleys.

Fonterra with higher dollar, is increasing sales. That doesn't mean Fonterra is finding it easy, just the reverse, but they are performing.

8/08/2012 6:00:22 p.m.

John wrote:

Good old Labour party grandstanding.

8/08/2012 6:00:21 p.m.

John wrote:

Good old Labour party grandstanding.

8/08/2012 5:47:47 p.m.

nigel wrote:

Since I don’t know much about economics is there anyone out there who can explain to me why I am wrong? If we devalue the dollar all our imports cost us more, particularly petrol. As the value of our exports goes up in relation to the NZ dollar, meat for example will cost more in the supermarket. Other countries like the USA do fine with the high value of their currency compared to ours as do places like Germany, so if their exporters can cope and even thrive, why can’t ours? The free market rules when it comes to exports, insofar as meat and dairy are not subsidised for the New Zealand consumers. So why do consumers have to subsidise exporters who cannot compete via artificial manipulation of the exchange rate? I say if you are an exporter and you can’t compete, do something else rather than lumber the rest of us with higher prices.

8/08/2012 4:48:13 p.m.

Mike wrote:

Labour is ignoring what is causing our strong dollar. ie the economic strength overseas - or lack of it!

We have gained against the EU due to the poor economic performanace of the EU, and the bailing out of 5 countries, with a further 7 near bailing out. This has pushed the NZ$ up vs the Euro.

We have gained against the US currency, again NZ data is much better than US data which has pushed up our currency.

So what is the Labour/Peters alternative? Shoot NZ in the foot and kill our economic performance costing jobs? Yeah that would lower our dollar!

Take the US economic growth for the last year, and its similar to our growth from the last quarter. The world is in recession and NZ is one of the best performing in the OECD. NZ has lost ground against the Aus $ and the Chinese currencies, and they make up the 2 largest trading partners of NZ. If exclude the mining from aus data, then NZ is outperforming even Australia! Now thats not bad in the world today.

Labour is talking of more taxes, which would cost more jobs, not improve growth. Even the raising of personal taxes of Labour of 39% lowered taxes collected by that tax bracket in boom years 1999-2008, although due to the Labour party being so open, they never released this. ie higher tax rates leads to lower tax collected - the opposite of what Labour claims.

One of NZ's leading growth industries is high tech, and we see lots of talk by Labour but little policy that would improve growth. And improved growth will lead to a stronger dollar, as it has currently. Labour has also talked of the reserve bank raising interest rates, which will also raise our dollar. They keep talking changes that dont match their claims!

Labour talks poor tourism numbers, and yet NZ tourism in June was the highest in 6 years, ie better than before the recession hit. Given the world situation those figures are amazing.