NZMEA call for Reserve Bank to sell NZ dollars and keep Kiwi low

The New Zealand Manufacturers and Exporters Association (NZMEA) has questioned the Reserve Bank's decision to buy New Zealand dollars, arguing the central bank should be selling them instead. This would help keep the Kiwi low to help exporters and encourage domestic spending on local products, the NZMEA said. The NZMEA said it was interesting that the Reserve Bank had bought NZ$540 million worth of New Zealand dollars between November and January, despite Reserve Bank Governor Alan Bollard saying that "the sizeable exchange rate depreciation will act to support the New Zealand economy" in the last Monetary Policy Statement. "It is clear that we need a low dollar both to help exporters and to encourage domestic spending on local products," NZMEA Chief Executive John Walley said. "The higher the dollar gets, the more of the Government's stimulus money is spent on imported rather than New Zealand made products. Both the Finance and Expenditure Select Committee and the Reserve Bank Governor Dr. Alan Bollard have mentioned the importance of monetary and fiscal policy working towards the same end; this is a clear case of policy conflict," Walley said. "The Reserve Bank's decision to buy New Zealand dollars is strange. This move can only serve to further damage the productive economy. Worse still, it sends the message that absolutely nothing has been learnt from the economic crisis. It seems we are still promoting the very things that got us into this mess, favouring consumption over working our way out of debt," he said. "Intervening to try and hold up the currency and unnecessarily holding up interest rates to "˜keep our powder dry' makes no sense to exporters. Short term interest rates need be no higher than those necessary to fund our external deficit; anything above that rate simply keeps speculative pressure on our currency."