Govt rejects call to print money
By Emma Jolliff
The Greens are calling on the Government to act to ease the pressure on manufacturers and exporters caused by the high New Zealand dollar.
They say our trading partners are manipulating their currencies to protect manufacturers while the National Government here does nothing.
Forty-thousand jobs have been lost in New Zealand’s manufacturing sector in the four years to June.
The International Monetary Fund estimates our dollar has overvalued by 15 percent and the Greens say it's time the Government intervened to bring it down. They want the Reserve Bank to expand the currency supply or, in old terms, print money – money, to buy assets.
“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,” says Greens co-leader Russel Norman.
Dr Norman also suggests using that Reserve Bank credit to invest in the Natural Disaster Fund.
But the Government says printing money would lift the cost of living for all New Zealanders.
“All that would do is make the international market look at New Zealand and say ‘no, you're losing the plot’, and we need to continue to work hard to grow the New Zealand economy,” says Economic Minister Steven Joyce.
But BERL chief economist Ganesh Nana agrees the Government needs to act.
“It's a market failure that we've got a New Zealand dollar that is so inappropriate for the New Zealand export sector,” he says.
“It's a bit tough for some exporters but it's actually a vote of confidence in the New Zealand economy,” says Mr Joyce.
Dr Nana says China, the US, Europe, the UK and Japan are all manipulating their currency to their benefit.
“We in little old New Zealand are left high and dry trying to abide by a text book that's way out of date,” says the economist.
The Labour Party says the Reserve Bank should focus less on inflation and more on the exchange rate.
“The National Party is ignoring international trends and we're losing jobs in New Zealand as a consequence,” says Labour Finance spokesman David Parker.
The downside of printing money is of course inflation, but Dr Nana says inflation is yesterday's problem and we're facing a much scarier problem – the prospect of deflation.