Dr Cullen urged to take Green medicine for dollar

Green Party Co-leader Rod Donald is urging Finance Minister Michael Cullen to consider Green proposals for getting the dollar down to a realistic level, given his failure to reveal the options he promised were available to him two months ago.

The New Zealand dollar is heading relentlessly upwards, and is widely tipped to top the 70 cents US mark in the near future. On a trade-weighted basis, the dollar has appreciated over 30 per cent in the last two years.

"Dr Cullen's failure to arrest the rise of the New Zealand dollar is causing extensive pain for exporters, tourism operators and domestic manufacturers," said Mr Donald. "The rural sector is already feeling the pinch and as hedging contracts run out, the consequences will start biting in the cities, as farmers and other businesses cut their spending.

"It's time for Dr Cullen to tackle the underlying causes of the high dollar. New Zealand is too dependent on foreign capital and trade and lack of govt controls have turned us into a paradise for speculators.

"Dr Cullen's first step should be to look at introducing a capital gains tax on properties other than the family home. This would help to deflate the property boom but more importantly would give the Reserve Bank the flexibility to drop the Official Cash Rate. The dollar would immediately drop as speculative capital went elsewhere.

"These steps might also make housing a bit more affordable in the long-run.

"Secondly, Dr Cullen needs to bring in tighter controls on foreign investment, both to limit speculation on property and to focus the inflow of foreign capital on new, productive investment. Coupled with a capital gains tax this would steer foreign and domestic capital towards productive activity.

"Third, Dr Cullen should re-orient the economy towards greater self-reliance. The Government's export-led growth strategy needs to be matched by a determined 'buy New Zealand made' campaign, led by the government through its own purchasing policies. This would make our economy less vulnerable to the over-valued dollar.

"Our fourth recommendation is for Dr Cullen to introduce across-the-board tariffs on imports to reduce the current account deficit and to provide some relief from the high dollar for domestic manufacturers." Rod Donald pointed out that across-the-board tariffs are permitted under WTO rules.

"Dr Cullen may not find any of these Green Party proposals palatable but I challenge him to come up with better ideas for reducing the pain being caused by the overvalued dollar."

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