By Alex Tarrant
Prime Minister John Key has hinted the government may do something to lift New Zealand's savings rate in the 2011 Budget, due in May next year.
Key was talking to journalists in Wellington about the high New Zealand dollar against a falling US dollar, and the government's stance that it will not intervene to push the currency down.
“Wander over to the Terrace and go and ask the Reserve Bank governor [about how the government can address the currency problem]," Key said.
"What he’ll tell you is in the end, the best thing the government can do is one, lift the overall competitiveness and productivity of the economy. Two, take the pressure off government spending, so that there is less pressure on him as Reserve Bank governor to compensate through monetary policy, and thirdly not to pretend we have an answer in a freely floating exchange rate when we don’t," he said.
"If you go and have a look at countries like Singapore, their options are there because they are very large savers. New Zealand’s not, and that’s one of the issues we may well address in Budget 2011, for that reason – that we at the moment have more limited options."
'Be more like Singapore'
The current currency debate in New Zealand has included calls for controls similar to those imposed by the Singaporean government on its currency. See more here from New Zealand Manufacturers and Exporters Associaton CEO John Walley, and also more here.
The debate has been heating up over recent months, with the Labour Party suggesting a "dirty float" of the New Zealand dollar where the Reserve Bank would intervene more frequently in the currency markets to control the currency.
However Prime Minister John Key has repeatedly said his government does not agree with such intervention, citing failed moves by other central banks around the world. Key reiterated his stance this morning, when he told journalists he had been in discussion with RBNZ governor Alan Bollard about the New Zealand dollar.
Focus on savings
The National-led government created a Savings Working Group in August this year to look at issues around increasing New Zealand's savings rate, following similar groups looking at tax, welfare, and urban design and infrastructure policies.
In October the savings group chair, Kerry McDonald, said the earliest gains in national savings could be made by government reducing spending and reversing its deficit. McDonald will talk to journalists again this Friday on the progress of the group.
English - 'We'd need US$200 billion in the bank to be able to fix the exchange rate'
Meanwhile, in question time on Tuesday afternoon, Finance Minister Bill English said it would be "pretty hard" to fix the exchange rate without US$200 billion "in the bank".
English was answering a question from Labour Finance spokesman David Cunliffe on the government's plans for the high New Zealand dollar.
"There are a couple of countries who fix their exchange rates – they have two characteristics," English said.
"Several hundred billion US [dollars] in the bank - well the previous Labour government made very sure we didn’t have several hundred billion, in fact we’ve got a hundred and fifty billion in debt to overseas lenders.
"The other thing is those countries tend not to be democracies," he said.
"Without 200 billion [US dollars] in the bank it’s actually pretty hard to fix your exchange rate."
(Updates with English's comments in Question Time, links, more on Singapore debate, Savings focus)
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40 Comments
Indeed. Maybe he should set up a panel of experts to examine the question, and at the appropriate time dismiss their findings (oh a I forgot they are already half way to doing that).
Mind you any panel that includes Mary Holm (continuing great call on gold there Mary) is hardly going to come up with anything game changing.
if that happens, GBH ( grevious bodily harm?) the you can book a palm tree and a nymphet for me,third down on the right ( not the left ) from you up there in the Phils.
rather be in those Phils than the ones of the Goff kind...bloody morons ..all of them ..except maybe for Cuntliffe?!
Imagine this , Rob , post the 2011 election : ACT is gone , and NZ First is back .
Is that so terribly unlikely ? And where would it leave JK , looking for a dancing partner . Labour get first crack at the wall-flowers : Greens / Maori / NZ First . Add in Jim Anderton and that tosser Dunne ............... And you got the all New Super Red Labour Government of Goofy , Klinger , and Cunny .
............ Um , do you prefer your mango juice with , or without ice ?
Yes Gummy but with the thick ones at the back you risk not knowing what they are cooking up out of sight. 2011 will be Labour's year of great promise on the back of greater promises...and we know how thick the peasants are...a promised extra $100 a week for WFF would soon harvest enough votes.
"the earliest gains in national savings could be made by government reducing spending and reversing its deficit.".....these taskforces are brilliant...this depth of thought would never have been achieved...we need more taskforces for sure...but isn't Bill English flat out making the deficit even deeper and borrowing a billion a month to pay the bills on the earlier borrowing that took place to pay the bills on earlier borrowings.....and is it not true that households are over 180 billion in debt to the banks....isn't this the real reason they have bugger all left from their low incomes!
Hey Gummy Bear...can you come up with a list of ways the govt can cut state spending..can you can you please Gummy...?
No ? There's a $ 2billion p.a. saving . Easy peasy .
Scrap the NZ Super ( Cullen fund ) .
Part privatise selected SOE's . Gumnut keep 51 % . Float 49 % onto the NZX .
Restrict DPB to those aged 21 and over .
Sell down the gumnut housing stock . Gradually get out of state housing entirely .
Scrap interest-free student loans .
.......... C'mon Wolly , your turn . Have some fun , imagine that you're in Wild Bill's shoes .
Hey GBH (that's abbreviation has connotations of its own)
Are you Don Brash in drag?
The biggest recipients of the welfare state (GBH among them I suspect) are the rip off fat cats with expensive accountants and lawyers. The other recipients are only damned by their much greater numbers and apparent visibility.
There's a rock over there for you to crawl under.
Sadly for me , I'm too stupid to know how to rip orf the welfare system . And have never directly received government aid ............. I feel so lost and bereft . I became independently " wealthy " from my own hard work and study . If only I'd not been such a fool , and had figgered a way to rort the system . Can you guys ever forgive me ?
Don't be upset at Basel giving you the brushoff Gummy...he's just an envious little Brush. But you were a fool to go and get wealthy at a time when the progressive socialists are out for other people's money to fund their promises....why don't you invite Goofy over for a rum punch...I'm sure you could swing one or two.
I know wotcha mean , Wolly . As I sit under the coconut palms , staring across a mill-pond flat blue sea , accepting another mango crush from the delectable Cherry ............. I think to myself ,............... " Gummy , you never ripped orf the Kiwi system , you always paid your way , you acted with honour ............ You're a bloody loser Gummy ! "
Oh the shame , the shame of it all .
Thankyou Basel Brush lll , thankyou for showing me the error of my ways . I promise to stop being 'like Don Brush , and to become more alike you , Basel lll .
Osh, gone, ACC restructured, 20% job losses in Wellywood and then a graduated pay cut for all civil servants. I mean doesn't bollard get paid twice as much as Bernake, we could pay someone half as much to stuff things just as much. MP's take a hit to their pension. Solo mothers on their own and welfare cuts across the board.
What he’ll tell you is in the end, the best thing the government can do is one,lift the overall competitiveness and productivity of the economy. Two, take the pressure off government spending, so that there is less pressure on him as Reserve Bank governor to compensate through monetary policy, and thirdly not to pretend we have an answer in a freely floating exchange rate when we don’t," - Key said.
In straight words it means: More self- sufficiency (independency) – when ever possible, planning, manufacturing our own quality infrastructure needs right here in NZ - by NZ companies– reducing our account deficit and adding more quality jobs (full employment) etc. etc..
Aren't you curious? Aren't you concerned? John Key making all these pronouncements, what Alan Bollard is, and isn't going to do. Is John Key the Ventriloquist's dummy and Alan Bollard the Ventriloquist. Or is it the other way round? John Key is an ex-currency-cowboy. He knows what moves markets. He knows he is SIGNALLING to his currency-cowboy-cronies that it's ok to short the USD and long the NZD for the moment, because the "government" is not going to intervene. Good one John. Questions to ask. Is JK still active in the currency markets? Does he have any blind-family-trusts currently trading the markets?
From his experience as an FX trader John Key knows that NZ ought not follow the futile path of Japan & Australia , in attempting to manipulate their currencies . Why float at all , if you can't stomach the ups & downs ?
And why burden your citizenry with the ensuing losses ? Oz are $ 4 billion in the hole , as it stands .
“On the grounds that New Zealand is too small to move ‘the market’, our authorities have traditionally opposed intervention notwithstanding the fact that sterilised intervention is a long established concept in finance literature and widely implemented around the world. Of course, it can run into trouble when authorities are trying to maintain an over-valued exchange rate, without adequate foreign currency reserves with which to intervene. But when the intervention is to prevent over-valuation, the only limit is the supply of a central bank’s own currency. This is not a problem for a truly independent central bank that is not facing inflationary pressures. When countries as small as Mauritius are intervening to stabilise their exchange rate and are being complimented on it by the IMF, one wonders why the New Zealand authorities think it is beyond them.”
Really, well I never. I wonder what kind of engineer said that?
I guess the problem comes with the the fear of those "inflationary pressures " and having a monetary policy that we know can't deal with them (non-tradeables inflation) very effectively, because if they could we'd not be seeing the degree of currency problem we are, notwithstanding others printing.
So the answer to the question that we should be asking about currency and improving monetary policy effectiveness are very similar, that is, to make the Kiwi less attractive, use supplementary instruments (note plural) to the OCR to help control inflation and make the Kiwi less of a sitting duck!
Put simply, use 'The Ratios' Luke - you know you can - drop the OCR, instead of dropping NZ's pants!
Cheers, Les
Now Les, you know it's not good for your ticker to get all worked up like that...and it's not as though 'they' take any bloody notice of us anyway...what you gotta do is convince the banks it's in their best (read profit) interest to jerk the strings and make old Bolly dance to a different tune...use the force Les...have a word with stonecutters inc.
Wally - ha, nice one. Although it might seem there is little in this for the banks and their shareholders, the irony is that had (thought experiment) AB been onto 'The Ratios' through the period we have defined as 'The Boom', they'd have been at a lot less risk, even without employing the latter day pru. measure of OCR. That is, re-rating risk ratings/capitals buffers; LVRs, even a formal cash fractional reserve, as per China, India. All simple well known (to them) stuff. But then again, ahh ... you finish off Wally, I'd only be repeating what you say a lot.
Cheers, Les.
The worrying thing is that this woman is that she is respected as an authority and advisor. I couldn't help myself and e-mailed about the half-truths and nonsense she was spinning about gold. Furthermore, I suspect she might be in the pocket of KiwiSaver. She's anti-gold yet wants the financial services industry to ream the general public. Go figure.
How to clean out the FX traders !
Big secret Kiwi sell
Announce massive QE3 ( Saving our export industries etc etc ... )
Watch them exit - then announce " Sorry guys - just fooling "
Wack in a massive Tobin tax -
When your the croupier and set the rules you can do whatever you want and never loose. What we have to do is stop the Kiwi being the worlds 6th most traded currency while we are about the 166th Country ranked in GDP.
The Kiwi is something the lads have a punt on overnite before they go to the pub of an evening. Pays for their booze - BUT it's no way to run an export driven economy that is in debt up to it's eyeballs and borrowing to pay the interest.
Used to be called insolvency
Easy to cut govt expenditure if cut the biggest welfare payment of all, national super. All the baby boomers and those older who couldn't prioritise saving for retirement, have their own private super etc and expect now to be be paid now in retirement, should be targettted for their couldn't care less attitude. And I don't mean bring in means testing as that will simply disencourge most to save even more.
Of course this won't happen as there is not a more self-centred pressure group than the older folk, so we are not getting govt cuts that readily.
All you do then is move them onto welfare........and its not the biggest issue (as far as I am aware?).....especially as there is an expectation that the money will be there.....what you can do in theory is increase the retirement age by say 2 years.....then ppl have the choice to save more and retire early or not. Biggest problem is once ppl start to get past 50 no one wants to employ them so Im not convinced uping by 2 years will make much of a difference myself......so they spend 2 more years of the dpb.....not a saving really.
I dont see means testing as much good I agree....I dont think the rate should be high....it should be just enough.....if you didnt save well thats a miserable retirement then, your fault.
regards
To 'save' you MUST have surplus wage, to have surplus wage you need 'productive' industry jobs and low personal taxes, to have productive industry you NEED people and a government with 'vision'!
Example: South Korea, 50 years ago in the top 3 poorest nations, now in the top 5 wealthiest via.............look into it IF YOU CARE! A Very interesting & worthy National Plan is what got them there, It was NOT property obsessions
Wolly, no doubt you enjoy your super you are given every week or is it fortnightly. I see you profess concern about everything and have all the theories about what to do /not do, however when it comes down to your own self-interest, you are just the same as the others you often criticise
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