The opposition Labour Party says the Reserve Bank of New Zealand should be considering currency intervention to signal to the market its unease over the high New Zealand dollar against its US counterpart.
The NZ dollar hit a post-float high of 83 US cents overnight, after the Reserve Bank yesterday released its June quarter monetary policy statement, which markets took as leaning more toward an Official Cash Rate hike in December this year, rather than the first quarter of 2012.
Reserve Bank Governor Alan Bollard reiterated the central bank's stance on currency intervention, saying any moves would be to take the top or bottom of an exchange rate cycle - meaning the Reserve Bank would have to think the currency was about to change direction. Bollard said yesterday the RBNZ could not fundamentally change the direction of the NZ dollar, as it was primarily driven by offshore forces.
Bollard also said the Reserve Bank watched the TWI in terms of its currency policies. Although the NZ-US cross rate is at a record high, the TWI has not hit highs largely due a weak NZ dollar against the strong Australian dollar (see exchange rates in the chart below). Australia is New Zealand's single-largest trading partner, meaning exporters selling goods and services across the Tasman are benefiting from that exchange rate, while commodity exporters using the NZ-US exchange rate have generally experienced price rises greater than the currency's rise.
That leaves non-commodity exporters into the US market, or markets that peg their currencies to the US dollar feeling most of the brunt of the high currency.
Prime Minister John Key waded into the debate on Wednesday, saying he did not think currency intervention policies worked, although he was happy with the RBNZ’s guidelines that any intervention would be to take the tops and bottoms off the exchange rate’s cycle.
On Friday afternoon, Labour Party finance spokesman David Cunliffe said in a statement the Reserve Bank should be "actively considering selective intervention in currency markets to signal its unease at the current levels of the dollar," although the decision to do so should remain with the RBNZ.
The Labour Party has signalled it would change monetary policy in order to make the Reserve Bank take more consideration of export and growth objectives, as well as its current task of controlling inflation.
"Today’s all-time high for the Kiwi dollar against the US dollar on the back of yesterday’s Reserve Bank statement shows our non-agricultural exporters will continue to be in serious trouble without appropriate monetary reform," Cunliffe said in a joint press statement with Labour economic development spokesman David Parker.
"Although the Reserve Bank can technically intervene in currency markets, its reluctance to do so even when the Kiwi dollar is setting record highs shows the balance of monetary policy is not right," Cunliffe said.
“While the Reserve Bank is significantly more bullish than Treasury, Labour has been advocating for some time a change to the Reserve Bank Act to promote a better balance between anti-inflation, export and growth objectives.”
A broader range of tools were needed for the bank to achieve this balance, Parker said.
“It is not all the Reserve Bank’s fault. It has become clear in recent weeks that the Government is borrowing an astounding NZ$5 billion more than it needs to [for the current year to June 30]. This is putting more pressure on our currency. Once again the Government is favouring its own interests over the interests of our non-agricultural exporters," Parker said.
“Non-agricultural exporters are withering and jobs are being lost in the face of an ever-appreciating exchange rate as the Kiwi dollar is becoming one of the highest-traded currencies in the world,” he said.
"The Reserve Bank should be actively considering selective intervention in currency markets to signal its unease at the current levels of the dollar," Cunliffe said.
“Such decisions must rightfully remain the prerogative of the bank, however,” he said.
“Labour is committed to a high growth, job-rich, export-led recovery. Monetary policy must play its part in achieving this.”
13 Comments
Have a care there Wolly ; didn't you see the iPredict poll which predicts a real possibility of a Labour coalition government ..... cobbled together with Greens / NZ Maori / NZ First !
...... don't slag off at your future masters ...... aha ha de haaaaaaaaaaaa !!!!!!
Nice one Iain, we need some of the same in ChCh:
http://www.interest.co.nz/poll/should-rbnz-look-our-own-version-money-printing-buy-government-bonds-and-drive-nz-lower#comment-623446Yup , Michael Joseph Savage was dying of cancer , in great pain , and Lee was verbally condemning him at every chance .
... Savage admitted , just before he died , that he was incredibly stressed by the continued attacks upon him by Lee .......
......John A. Lee ....... some bloody hero you've got there , Parksy !
The depression has began, DJI will start falling again to 6-8000 in the next 3 months. QEIII will not save it either.
I would not like a $300K mortgage in the coming year as job losses worldwide will reduce housing prices near 40% in NZ. Bank balance sheets will be very poor. The next printing presses being used will not be the $ bill presses, but the banks presses sending out letters saying 'if you do not reduce your debt we will need to take action, refer to section 45.2.3.(ii) of the fine print.
In the years to come, no work, no dole, at least something good will come out of this. Another positive is the family unit will get stronger as you will need more in the way of support groups. In 1930s USA this helped people handle the depression better.
My mortgage is only $20K now, I do not need to sweat as much as most. I knew this day would come, hence I have paid off $80K in the past 15 months.
Who to blame, no one in NZ really, other factors worldwide have been the cause.
Good weekend fodder for the readers Parky...but you still refuse to say boo about the management of the "credit" by pollies...can you really trust a Labour govt today...can you see Cunliffe with complete control over the issuing of "credit" for social projects....?
c "There needs to be put in place constitutional checks and balances that remove the human element from the equation".....oh no really...gosh I am surprised....
Why don't you concentrate on that Iain....really really think about it....we have a system of govt that has no constitution...and even if we did have one of those...the system would make dam sure it was rewritten to benefit them....
So after a comprehensive study..what you end up with is a simple conclusion...there is no way you can remove the human element ....got that Iain...!
It comes down to you claiming politicians should be in charge of the money because you don't want it being managed by the private sector with Reserve Bank oversight(whatever that means)....you want socialism to the hilt...I think you are a control freak...and I don't see you or your social credit public credit mates as being fit for the job.....
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