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


High exchange rate policy breeding perverse

Wednesday, October 18th, 2006

High interest, high exchange rate policy breeding perverse outcomes

Keeping interest rates high to check energy price hikes from overseas and inflation driven by rapidly rising government costs has to stop, the Employers & Manufacturers Association (Northern) says.

"While our interest rates remain high they will continue to attract money here to take advantage of them," said Alasdair Thompson, EMA's chief executive.

"That's the main reason the Kiwi dollar is way over its long term average of 57c US and causing our exporters' hardship.

"The credibility of our Reserve Bank's high interest, high exchange rate policy is now under huge pressure because of these perverse outcomes being generated for business and the nation's prosperity.

"High interest rates won't stop Kiwis spending while 80 per cent of their mortgages are for fixed terms; all they do is stifle exports and prevent the building of foreign exchange surpluses.

"The quick rise of the Kiwi dollar recently set off by comments by Dr Bollard, showed again our economy is totally exposed to speculators offshore.

"Our exchange rate is therefore no reflection of the performance of our economy though economic theory says it should be.

"However inflation is not out of control; it's at the top of the acceptable level, hence there is no need for more interest rate rises at present.

"Our advice to the Reserve Bank is, be patient, like Australia's Federal Reserve.

"Part of the government's surplus is going into savings, which is also helping contain excessive inflation.

"In the absence of more export receipts we will need substantial productivity increases and/or more people if the economy is to keep growing."


© Scoop Media

Business Headlines | Sci-Tech Headlines


Voluntary Administration: Renaissance Brewing Up For Sale

Renaissance Brewing, the first local company to raise capital through equity crowdfunding, is up for sale after cash flow woes and product management issues led to the appointment of voluntary administrators. More>>


Approval: Northern Corridor Decision Released

The approval gives the green light to construction of the last link of Auckland’s Western Ring Route, providing an alternative route from South Auckland to the North Shore. More>>


Media Mega Merger: Full Steam Ahead For Appeal

New Zealand's two largest news publishers have confirmed they are committed to pursuing their appeal against the Commerce Commission's rejection of the proposal to merge their operations. More>>

Crown Accounts: $4.1 Billion Surplus

The New Zealand Government has achieved its third fiscal surplus in a row with the Crown accounts for the year ended 30 June 2017 showing an OBEGAL surplus of $4.1 billion, $2.2 billion stronger than last year, Finance Minister Steven Joyce says. More>>


Mycoplasma Bovis: One New Property Tests Positive

The newly identified property... was already under a Restricted Place notice under the Biosecurity Act. More>>

Accounting Scandal: Suspension Of Fuji Xerox From All-Of-Government Contract

General Manager of New Zealand Government Procurement John Ivil says, “FXNZ has been formally suspended from the Print Technology and Associated Services (PTAS) contract and terminated from the Office Supplies contract.” More>>