Interest rate rise will hit the regions

The latest interest rate rise will hit the fragile regional economies of New Zealand and hurt exporters by putting more upward pressure on the exchange rate, says Labour’s Finance spokesperson David Parker.

“The regions are already hit by dropping export prices for dairy products and timber prices plus they have flat housing markets from LVRs . Now they have to endure another interest rate rise which is a direct result of the Auckland housing price bubble.

““The Reserve Bank Governor has already said mortgage interest rates will get close to 7% by the end of the year, adding $233 to monthly costs on a $300,000 mortgage.
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Lower interest rates, a more competitive dollar and better jobs from Reserve Bank changes

Labour’s Reserve Bank Upgrade will lead to lower interest rates, a more competitive dollar and better jobs with higher wages, says Labour’s Finance spokesperson David Parker.

“The next Labour Government will upgrade the Reserve Bank Act by broadening its objective and giving it a new tool that will enable it to tackle our high overvalued dollar, help create jobs and keep interest rates low.

“Governments around the world have changed how they operate monetary policy since the global financial crisis. New Zealanders have a dollar overvalued by up to 15 per cent, a weakened export sector and mortgage rates that are among the highest in the developed world.

“Labour will make the following changes to the Reserve Bank Act as part of our Economic Upgrade:

1) Broaden the Reserve Bank’s objective beyond inflation and price stability to also assist to achieve a positive national external balance, which will boost economic growth and create more jobs.

2) Encourage the Bank to use its current tools differently, in a way that will help exporters and home owners.

3) Introduce a new tool – a variable savings rate or VSR – allowing the Bank to vary KiwiSaver savings rates (which would be universal under Labour) as an alternative to raising the OCR to take the heat out of the economy. This VSR would mean Kiwis would pay money to their retirement savings instead of higher mortgage payments to overseas banks.

“The independence of the Reserve Bank, and its ability to meet its inflation control target, are maintained.

“Labour’s changes will work with our Economic Upgrade focussing on investment, innovation and industry policies.

Alongside a capital gains tax, our KiwiBuild housing policy, universal KiwiSaver and reduced costs to businesses through NZ Power, Labour is offering an alternative that will help Kiwi families and ensure our economy can create better jobs and higher wages,” says David Parker.

29 April 2014 MEDIA STATEMENT


IMF says ‘ways to innovate’ on monetary policy

The International Monetary Fund has admitted the Kiwi dollar is overvalued by up to 15 per cent and suggested, while care must be taken there is room for innovation on monetary policy, says Labour’s Finance spokesperson David Parker.

“The IMF has said the dollar is 5 to 15 per cent overvalued. That’s crippling for exporters and it’s holding our economy back.

“The IMF has now admitted there is scope to change the Reserve Bank Act with head of the IMF mission Brian Aitken saying, ‘There might be ways to innovate but you would want to be careful’.
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More job cuts, monetary policy upgrade needed

The loss of 70 jobs at Alloy Yachts shows the pain being inflicted on exporters by the high New Zealand dollar and the need for an upgrade of our out-of-date Reserve Bank Act, says Labour’s Finance spokesperson David Parker.

“Our overvalued New Zealand dollar is having a huge impact on manufacturers, especially those like yacht-building that rely almost wholly on exporting. In January Fitzroy Yachts in New Plymouth said it would have to close down. Now Alloy Yachts is slashing its workforce.

“It is a heartbreaking time for the families of those workers who often have to leave the region or go overseas to find jobs; all because our dollar is overvalued, by up to 15 per cent, according to the IMF.
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Interest rate rises will hit homeowners and businesses

Kiwi homeowners and businesses are set to bear the brunt of National’s failure to get a grip on the housing market with interest rate rises to create an effective pay cut of $880 a month for many Aucklanders, say Labour’s Finance spokesperson David Parker and Housing spokesperson Phil Twyford.

“Skyrocketing house prices in Auckland have seen many families borrow significant amounts and a mortgage of $500,000 is not uncommon,” says Phil Twyford.

“The Reserve Bank yesterday forecast a 2 per cent rise in interest rates over two years. On an average house price of $685,000 with a 10 per cent deposit that means an increase of $880 a month.

“The interest rate rises will be partly down to National’s inability to handle the housing market with prices skyrocketing. When Kiwis are feeling the pinch they will know where to point the finger.

“National should stop wasting time trying to spin New Zealanders and focus its energy on sorting out the housing market,” says Phil Twyford.

“National has tried to claim that low interest rates are the symbol of good economic management. Now they claim that rising interest rates are because of good economic management. Their attempt to have it both ways is laughable,” says David Parker.
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Dollar’s post-float high costing Kiwis jobs

The dollar has hit a post-float high on the trade weighted index for the second time in two months, showing it is critical that concrete action is taken to make our overvalued exchange rate more competitive, says Labour’s Finance spokesperson David Parker.
“The dollar has been too high for too long and it’s crippling Kiwi exporters. Now it’s at the highest level on the trade weighted index since it’s was floated.
“One of the reasons that the Tiwai Point aluminium smelter may be shut down is that the dollar’s strength is seriously impacting on their business. Over 3000 people rely on the smelter for their jobs.
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