The relentless pressure from exporters, manufacturers, unions and opposition parties has pushed the Reserve Bank Governor to acknowledge the damaging impact of the high dollar, yet nothing of substance has been done to protect jobs and exports, says Labour’s Finance spokesperson David Parker.
“Reserve Bank Governor Graeme Wheeler has tentatively responded to pressure on the exchange rate in his Monetary Policy Statement today.
“He said: All other things equal, a higher exchange rate relative to the baseline, in the absence of a corresponding relative strengthening of New Zealand’s economic outlook, would warrant lower interest rates’.
“But still, acting under his current inflation-first mandate, and despite massive pressure on manufacturers and exporters, a huge current account deficit and the loss of thousands of jobs, nothing substantial has been done to lower the overvalued dollar. That’s because, under this Government, the Bank’s out of date mandate is stuck in the past.
“Exports are suffering, jobs are being cut and our current account deficit is getting lower and New Zealand poorer as a result.
“The Reserve Bank has a tunnel-vision mandate from the 1980s that requires it to give primacy to inflation. If the inflation forecast changes for the worse then hopeful exporters can kiss goodbye to any OCR cut.
“The tunnel vision mandate needs to change. To do that the Reserve Bank Act must be overhauled and the primacy given to inflation removed. The Reserve Bank must be allowed to give proper weight to other important economic considerations such as jobs and the exchange rate.
“Currently our Reserve Bank is a retro-throwback to the 1980s. The world has changed dramatically since then. But the Government just sits on its hands when action is required,” says David Parker.
14th March 2013 Media Statement