NZ First/BERL tackle overvalued dollar
New Zealand First wants an amendment to the Reserve Bank Act to correct a "highly over-valued" New Zealand dollar.
A report from economic and business research company BERL into the merits of such an amendment is expected to be released today.
List MP Andrew Williams says the act was created in 1989, when there was a “whole different epoc”.
He believes there is broad consensus among the International Monetary Fund, manufacturers and exporters that the dollar is overvalued.
The current act has given New Zealand a chronically overvalued exchange rate and as a result every week businesses are closing, jobs are being lost and markets are in jeopardy, he says.
THe exchange rate has encouraged people to "park" money in New Zealand to earn higher interest rates, which has led to all manner of distortions.
“The facts of an over-valued exchange rate are stark – loss of competitiveness, costing us markets, costing us jobs and losing New Zealand many major employers.”
Mr Willams says the bill New Zealand First has introduced to amend the Reserve Bank Act will mean the bank can concentrate on a balanced macro-economic policy, in which price stability is no longer the priority.
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Comments and questions19
So drop the dollar and see a whole bunch of different businesses close. That's a wierd suggestion from NZ first who are paranoid about overseas purchasers buying NZ real estate. Nothing like a low dollar to speed that up.
Now here's something to chew on. The dollar is not too high. Nor is it to low. It's simply worth what it is worth - forever self correcting automatically. There will always be differing views; those who would like it higher, and those who would like it lower. It's simply a matter of which side of the fence you are on.
"In which price stability is no longer the priority". There is the admission...New Zealand First wants inflation.... with a 25% devaluation the cost of living will increase by around 20%. Everything we import or export will rise in price, the purchasing power of savings and wages will be gutted, and workers will demand higher wages to compensate which will ultimately cancel out any temporary benefit to exporters. Labour is on this bandwagon too with NZF..... are they mad? Or have they such a paucity of ideas that this is all they can come up with? Heaven help us if they become Government......and watch the flight of capital happen if they rise too far in the polls!
Money in the bank is dead money anyway. As anyone who has it there.
I think you'll find in NZ most of our essential items; i.e. energy, housing and food, we are price takers. Duopoly/cartel type businesses charge what they can get away with. This is linked to affordability, including the price of substitutes.
Whats so flash about this Government anyway? All the GST increase did was reduce the spending power of the masses, while a small component hoard it. What worst could you do for economies in recessionary times?; restricting the circulation of money and multiplier effect.
Its common sense that GST is a good times tax!!
Flight of capital, paucity of ideas... yada yada yada blah blah blah... cause everything is really rosey and working so well right now under the current regime... we couldn't possibly commit blasphemy against the high priests of greed and their assets/savings, purity must be preserved at all costs... sorry average people, just collateral damage, you understand and the fact that virtually every exporter cites the dollar as one of their major problems, well what would they know in comparison to the god like insight the the high priests of economic purity and the farmer from Dipton eh?
Isn't there supposed to be an h in epoch?
and W'H'anganui, and g'h'ost,
Who gets the benefit of devaluation,certainly not the consumer.The Aussie v NZ dollar is in our favour. Usa dollar perhaps not so good,then they are not as important as Australia our major trading partner.I say suck it up exporters,never heard you bleating when ten to twelve years ago you all creamed it big time.
Wiiliams is an economic dickhead, who doesn't know what he is talking about. His views are B.S. I will debate him in any forum at any time, and prove want an idiot he is.
most of NZs income is derived from exports thus devaluing the dollar (which really means just limiting FOREX speculation on it... remember Iceland and the carry trade?) is a good idea! Anyone who argues against it should have a long hard look at China's current position and analyse how they got there...
yes but most of new zealand's expenses are derivced from IMPORTS! do you want to see petrol at $2.8 a litre? your jap car 20% more expensive?
Print money and use it to buy overseas assets. It sterilizes capital account issues. China has been doing it for years...
Make our exporters competitive and boost domestic manufacturing.
Only trouble will be the cost of Oil - $3.50/ltre petrol won't be fun..
So this "Andrew Williams" knows what the dollar should be? I believe he would know about as much as Mr Bollard, that is, SFA!
Is Mr Williams suggesting a race to the bottom between Nations?
Is he saying that we would be better off with a lower dollar?
Following that reasoning suggests Zimbabwe should be "rolling in clover!
I would far rather Mr Williams keep worrying that harpie Maggie Barry, the cuckoo MP who has parked herself on Aucklands North Shore. Barry showed her true colours by trying to stitch up Devonport over the navy land the Nats & Finlayson are stealing to give to maori. Mr Williams was a controversial mayor but an effective hawk with a genuine passion for the local community. This economics issue will do him no good and I believe he should leave it alone and concentrate on the scandals closer to an electorate that appreciates his talents.
Except that the "Big Mac" index indicates the NZ$ is not "highly over-valued" but somewhat under-valued.
Keep politicians out of things they don't understand. (Most things that matter.)
The problem with the over valued dollar is the NZ government.
It deliberately targets non resident investors who are attracted by the high credit quality of the Crown and our relatvely high interest rates. Of course these investors have to buy NZ dollars to participate, the result we see.
There is a simple solution. Reintroduce non resident with holding taxes. Unlike any other investor in government securities a foreign investor pays not one cent of New Zealand tax! The argument from official is that thay pay tax at home but who cares. Many I suspect a resident in tax havens anyway.
This situation is prima facie attractive to the government as thay get lower yields ,but no impact is considered of creating a level playing field, as every NZ resident does pay tax on the interest and that the taxing recipent is the govrenment itself.
Until the DMO is measured on the basis on net cost of borrowing after taxes to the Crown, this farce will contine exerting hugepressure on the NZ dollar and the pricing out of NZ resident investors.
Yes, if the NZ dollar is seen as overvalued what is a solution?
liberte
A little like NZ First - created in a whole different epoch...
Perhaps it is time to give NZ First a go at fixing our economy?
They couldn't do much worse than the current bunch!
WG
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