Oddly not listed on their The Nation webpage is the panel discussion between Winston Peters, David Parker and Don Brash. It was covered briefly in a news item: Labour supports bill to lower NZ dollar.
Labour Finance spokesman David Parker:
“Inflation targeting for New Zealand has passed its usefulness, it was very important at the time to focus solely on inflation, but at the moment we face competitive devaluation abroad. This is hurting our exporters – ordinary New Zealanders who are losing their jobs and leaving to Australia as a consequence.”
About all Parker could say was “time to do something different”.
In a recent speech Parker to EPMU said:
But if monetary policy drives them away, then it needs to change.
Labour is not afraid to make these changes
Time and again exporting businesses say their greatest challenge is volatility in and overvaluation of our exchange rate. The IMF agrees our currency is overvalued.
Our dollar is volatile against all currencies except Australia, and is sustained at uncompetitive levels. This is often the difference between profit and loss. Between employing, exporting and not.
In my view, we face competitive devaluation abroad and ignore it at our peril. Other countries are competing to increase their exports by devaluing and manipulating their exchange rates.
But we operate monetary policy as if the history of the last two decades didn’t happen.
Our Reserve Bank Act was written in a time when the main economic threat was inflation.
A more pressing challenge now is how our exporters, and their employees, are hindered by an uncompetitive dollar.
But no indication of what specifically Parker suggests is done differently.
David Cunliffe has also recently been talking on this.
But a huge factor is National’s not-my-responsibility approach to the over-inflated and over-speculated New Zealand dollar. Manufacturers and exporters and now even the bankers know it’s just not sustainable for things to go on as before.
Today should be a day for action. Instead it’s shaping up as a day when National will vote down Winston Peters’ Reserve Bank of New Zealand (Amending Primary Function of Bank) Amendment Bill at first reading.
The New Zealand First leader has a flair with words, and I expect he’ll accept that the language of his Bill can be moderated and polished.
However, the purpose of Mr Peters’ Bill is valid:
The simple fact is that interest rates, the only tool available to the Governor of the Reserve Bank to combat inflation, impacts on far more than just inflation—it is not a siloed effect. Most obviously it impacts on the exchange rate…. A far more co-ordinated approach between monetary and fiscal policy is required to both combat inflation and keep the economy balanced.
What’s crucial is expanding the scope of the independent Reserve Bank Governor to take action based on measures of New Zealand’s welfare additional to inflation – measures such as the strength of the dollar, the external balance, GDP growth and the level of unemployment.
But no solutions offered, effectively Cunliffe is just saying “do something different” but all they offer is talking about it.
I think it’s still important to target inflation, as Brash said, inflation erodes the value of wages.
And one of the biggest problems with trying to compete with monetary devalution measures – many other countries have much bigger money printing presses than us. We can’t compete.
Something different for Parker, Cunliffe and Peters would proposing an actual workable solution. Otherwise they are just poliwaffling.