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Currency intervention as advocated by a business group and opposition parties would cut New Zealand living standards, the government says.
The Manufacturers and Exporters Association, New Zealand First and the Labour Party are urging the government to do something about the high New Zealand dollar.
Earlier yesterday the business group advocated the government intervening over the head of the Reserve Bank and devalue the New Zealand dollar to US60 cents.
Both Finance Minister Bill English and Economic Development Minister Steven Joyce yesterday afternoon defended the government against a concerted attack on the issue.
Recent job losses in the manufacturing sector are “regrettable but probably unavoidable”, Mr English told parliament, while Mr Joyce accused the opposition parties and the association of “seeking to prop up declining industries” and “seeking to bet against world financial markets using taxpayer funds”.
Questioned by New Zealand First leader Winston Peters why he would not do this, Mr English said such an action would only drive living standards downwards and would not help the economy.
“We do agree there is a level of discomfort about the high level of the New Zealand dollar but we certainly do not agree with the view held by the Manufacturers and Exporters Association that the dollar should be devalued to around US60 cents,” Mr English said.
Such a move would imply devaluation down to Australian 58 cents, he said, and the combination “means a drop of income and living standards of about 20% in New Zealand".
“If they think there’s a gap in living standards now ... that gap would widen to a chasm and thousands of people would be leaving for Australia because of its higher standard of living.”
Questioned over announced job losses from Norske Skog’s Kawerau pulp and paper plant, New Zealand Aluminium Smelters’ Tiwai Pt plant and other job losses in the export sector, Mr English says little can be done.
“All those job losses are regrettable but probably unavoidable.”
Net new jobs are up 50,000, he says, with the prospect of net 150,000 more new jobs over the next four years. That meant some job losses as the economy adjusts, but new ones would more than replace lost jobs.
Mr Joyce re-emphasised that when Labour economic development spokesman David Cunliffe asked about job losses.
They were inevitable at Kawerau as newspapers are being replaced by iPads and other electronic devices, he said.
“I appreciate the member is seeking to prop up declining industries but we don’t see that as the way to go.”
Currency intervention along the lines advocated by the Manufacturers and Exporters Association would only see a drop in living standards – Mr Joyce says it will be 25%, rather than the 20% figure given by Mr English.
That will be made up of higher fuel and other import costs, he says. “I can’t think of a more destructive policy for this country.”