Winston Peters' report wants halt to economic booms
A new report wants the Reserve Bank to put a halt to economic "booms" by creating a more competitive and less erratic exchange rate.
The New Zealand First commissioned BERL report evaluated the Reserve Bank Act alongside NZ First's Reserve Bank of New Zealand (Amending Primary Function of Bank) Amendment Bill.
Report authors Kel Sanderson and Dr Ganesh Nana concluded an amendment was needed in order "to benefit New Zealander’s lives".
They came up with three main reasons for change:
- The present Act’s purpose is redundant.
- An amended Act is needed to grow our economy.
- An amended Act is needed to halt financial failures.
The authors believe the current primary function of controlling inflation is no longer as important as it was when the Act was introduced in 1989, at a time when the world’s inflation was at 24% and New Zealand’s was 7.5%.
In 2011, inflation here was 2.3% – lower than world inflation.
BERL says instead of encouraging efficient production of more goods and services, the Reserve Bank is holding interest rates at a 2% to 3% margin above the average rates in Australia, the US and Britain.
This encourages people to buy New Zealand dollars to earn higher interest, which increases our exchange rate and makes locally made goods more expensive and less competitive in world markets.
“This should make sections and housing more affordable. The land didn’t suddenly get more valuable, there was more mortgage money chasing it.
"We will not have a future boom where we can be persuaded by the banks to again take on increasing mountains of mortgage debt.”
But the report warns the changes would have a one-off increase in the price of imports.
The exchange rate is likely to be about 10% lower, which would increase the cost of imports.
New Zealand First leader Winston Peters has, predictably, welcomed the so-called "independent" report.
“BERL clearly states our private member's bill, which would give our dollar its true value, will make lives better for New Zealand workers by increasing incomes and assisting business growth,” he says.
“We are a small economy which attracts ‘hot money’ from foreign investors which pumps up our interest rates.
"Our bill would largely eliminate the environment which allows this to flourish.”
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Comments and questions18
For once, Mr Peters make sense.
Enough of the likes of Don Brash and Bollard making a hash of monetary policies and crucifying the productive sector on the alter of the RB Act.
You call it "Winston Peter's report".
And you read it!! WTF, are you short of reading material or what?
Give Peters his due - he showed NZ what the Fay Richwhites were really up to and exposed them for the hypocrites and traitors they are.
Peters/BERL is really suggesting NZ join the rest of the western world desperately printing money to keep their bloated welfare states afloat.
Instead they should focus on abolish all the obstacles that prevent this money looking for a good home from creating profitable and job-creating enterprises in NZ.
Or is that far too obvious common sense for politicians and their tame economists?
As an exporter this makes complete sense, Hong Kong and China both do this and look at where they are today. Small exporters cannot afford to manage exchange rates.
This makes sense all round.
Businesses would be able to plan & employ more effectively, which can only be good for the economy.
This would remove the speculators from the market also, which do nothing but damage.
I think we all know this wont get passed with this present National government, because it wont suit the money men; Jonkey being one of them.
Yet its so obvious these banksters have/are screwing the world economy, for the benefit of a selective few.
"Businesses would be able to plan & employ more effectively, which can only be good for the economy"
this is what hedging and risk management is for
Hedging adds no value to business. Its just another parasitic cost, that the banksters have manufactured.
Risk management is unrelated to my point. This is a necessary function in business anyway.
Wrong on all counts. First, uncertainty would be increased since the RB would have conflicting objectives they could oscillate between at will.
Second, it would not be reduced, since the NZ$ (and A$) is treated by overseas investors as a proxy for commodity prices and responds to overseas events and markets rather than anything the RB does.
Third, you are in fantasy land if you think it would remove speculators from any market. They will seek opportunities and profit wherever they can find it, and they have sharp eyes for official foolishness.
Facts are the value of currency trading in the NZ dollar is more than 150 times our GDP.
People dont seem to understand there are corporations out there which are way bigger than NZ's entire economy.
Traders only have to put a faction down. NZ is but a small business, being manipulated by big business; at our businesses expense.
Alan, you are obviously not in the business of exporting. If you havent seen this countrys economy deterioriate due to current policies, then you must be blind.
If you dont think this will work, what is your magic formula?
There is no magic formula. Only common sense works. To reduce currency risk try to contract payments on the same currency as your costs. Expect countries in trouble to have weak currencies. Hedge only in exceptional circumstances. Be as efficient as possible but when the economics don't work change something.
Well done Winnie, and Berl, it's about time some one realised the RBA as written has had it's day, right for it's time wrong for today!!!
The productive enconmy is on it's knees, it may soon be on it's back, The cinderella industry, dairy, the only sector the Govt is interested in, has huge debt, with Loans advanced by banks to keep farmers in business because the fundamentals of dairy dont work at current exchange rates.
A snezze with the exchange rate will tip many many more farms over.
more of the same as proposed by Billie English yesterday for the new RB Govenor will drive us nearer to the PIGS
unfortunately for us all Billie does not have the wit or wisdom of Winnie
Winston is no monetary genius, don't let him anywhere near the RBA.
NZ needs to look to the future not fight the last war. Hayek had a lot to say about competing free market currency systems vs. the broken state monopoly money systems we are stuck with ... go here and read the links in "Resources"
http://monetaryfreedom.org/
Particularly this https://mises.org/daily/3204
Research digital-gold, crypto-currencies and bitcoin. NZ needs to look to the future.
There can be no doubt that the reserve bank's policies need radical review.
For too long has borrowing been encouraged and saving discouraged by interest rate settings.
The sad fact is that their political masters encouraged this approach,whether through ignorance or lack of concern is an unknown although some suspect a focus on votes was to blame?
liberte
Go WInnie
Does anyone really believe that the RBA is controlling the rate of inflation?. This report is just a Political talk fest as usual, meanwhile little gets done to actually improve the economy. Businesses that export need to be encouraged, imports need to be contained, our people into work and our reliance on welfare eliminated.
Sounds good. All exporters would love it. But how would it pan out? What would be the "hard to do" bits?
Some good ideas here!
The reserve bank has been a hinderance to growth with it's outdated policies and revision is necessary.
However, our politicians have been the main drivers behind it's policies and we probably need some new ideas at the top to make progress.
WG