Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Why Cullen Must Go

Import News from the Importers Institute

27 September 2000 - Why Cullen must go

The Minister of Finance must go, quite simply for the same reason that every coach of a non-performing sports team eventually does.

(This article first appeared on The Independent, 27 September 2000)

In rejecting Importers Institute statements attributing responsibility for the kiwi's collapse to government policy, Bob Edlin (Editorial, 13 September) said we must look overseas to identify the forces at work on our dollar.

He pointed to the size of New Zealand's current account deficit and the relative strength of the US dollar.

Those factors are, of course, relevant, but far from conclusive. The European Union has a balance of payments surplus, but the euro has fallen against the American dollar, while the US balance of payments is in deficit.

The value of a currency depends largely on investors' perceptions. It appears the euro is seen to be as non-viable as the Labour/Alliance coalition's policy direction. Perceptions, however, are also not always conclusive: Since the beginning of this year, the New Zealand dollar has devalued by about 18% against the Russian rouble.

The New Zealand dollar is not so much steadily falling in value because we are gradually becoming impoverished by frequent tea breaks, as it is collapsing in direct response to government policy.

It is entirely understandable that those directly responsible for policy would want to divert attention from the consequences of their decisions. They blame a fall in German business confidence, point to the strength of the US economy and tell us we must consume less and produce more.

When all else fails, politicians like Dr Cullen will simply assert the dollar is undervalued. It is not very clear how he manages to be better informed than the markets in reaching such an insight, but it would be a fair bet that he is not investing his own salary on the forex market.

The most absurd argument of them all is that having a low currency is good, because it makes it easier to export. This is as true as saying that knocking $50,000 off the price of your house is a good thing because it is then easier to sell. Imports and exports go together. It is simply not possible to increase local production significantly without also importing more raw materials, machinery, and all those other things a country with a small industrial base must buy abroad, such as computers, pharmaceuticals and cars.

While exports and imports are strongly correlated, the same cannot be said in respect of the exchange rate. Factors such as the Richardson reform burst of the early 90s, followed by the big Peters spend-up and the election of a Labour/Alliance coalition last November correlate much more closely with the kiwi's fortunes.

The option of going back to a more bucolic lifestyle, using natural remedies from organically grown herbs and setting up cottage industries making macramé hemp pot hangers is not consistent with New Zealanders' aspiration to live in a first-world economy.

The Importers Institute called for Dr Cullen's resignation, a move that Bob Edlin labelled as "shifty dealers in political spin [showing] a lamentable paucity of constructive policy options and a spuriously simplistic clamour for heads to roll".

Our answer to that superb collection of adjectives is that Dr Cullen must go, quite simply for the same reason that every coach of a non-performing sports team eventually does.

To improve the balance of payments, we must encourage more exports and enterprise. It is difficult to see how we can do this in a policy climate where new labour market rigidities are introduced, taxes are increased, biology research is put on hold, privatisation is ruled out on ideological grounds and selling our best produce remains the preserve of functionaries employed by cooperatives.

During the election campaign, Dr Cullen told the business community that all a Labour-led government would do was make a few technical amendments to the Employment Contracts Act. When the true nature of the changes helped to precipitate a fall in business confidence, Dr Cullen again assured businesspeople he would take their concerns on board. A substantially unchanged Employment Relations Act has since been passed.

Like her social-democratic colleagues in Germany and France, Prime Minister Helen Clark will soon realise she has no option but to moderate her government's anti-business policies.

Mr Cullen appears to be in denial, hoping things will come right of their own accord. He offers no solutions and does not have the credibility with the business community to carry out the necessary changes. That is why we said that, for the good of New Zealand, he must go.

* * *

Previous Import News items are published on our Internet site http://www.importers.org.nz. If you do not wish to be included in this mailing list, please reply to this message with the word REMOVE in the subject line. If you would like us to send Import News to friends or associates, please ask them to email info@importers.org.nz with the word SUBSCRIBE in the subject line.


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Income Equality: Time To Double-Down On Cutting CEO Salaries

With reports of a slow-down in CEO pay rises last year, it’s time for Kiwi corporates to double down on cutting excessive salaries to ensure this is a trend not an accident, said Peter Malcolm, spokesperson for the income equality project Closing the Gap. More>>

Manawatu-Whanganui Projects: PGF Top-Up To Rural Broadband Roll-Out

The government has effectively raided the $3 billion Provincial Growth Fund to top up the budget for the second phase of its rural broadband initiative, filling in mobile 'black spots' and ensuring broadband is available to marae that don't have access now. More>>

ALSO:

Other Windy Cities: Auckland-Chicago Named A Top 10 ‘Most Exciting’ New Route

The inclusion of Auckland-Chicago on Lonely Planet’s Where to fly in 2019? The 10 most exciting new flight routes list comes just two weeks before Air New Zealand prepares to celebrate its inaugural flight to Chicago’s O’Hare International Airport on 30 November. More>>

Deadly Strain: ESR Ups Its Reporting On Meningococcal Disease

The increasing number of cases of Group W Meningococcal disease (MenW) has prompted ESR to increase its reporting on the disease to the Ministry of Health. ESR has upped its reporting to weekly. More>>

ALSO: