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Graeme Wheeler Speech – "Best to do Nothing"

Graeme Wheeler Speech – “Best to do Nothing” – 21 February

The Reserve Bank Governor, Graeme Wheeler’s speech yesterday was essentially more of the same – an ongoing attachment to orthodoxy reinforced by a reluctance to do anything new, believing it is best to do nothing as change always has its risks, says the New Zealand Manufacturers and Exporters Association (NZMEA).

NZMEA Chief Executive John Walley says, “Mr Wheeler outlined the risks of each policy change and rejected each of them in turn. Best to live with the current choices and associated risks; all a bit hard to take when, as an exporter, your back is to the wall.”

“We saw technical analysis from John McDermott a couple of weeks ago and more from Mr Wheeler yesterday; all good analytic reasons for their position. Unfortunately the analysis seems to miss the fact that high quality, high value, high tech manufacturers don’t have the confidence to invest in New Zealand.”

“We agree with Mr Wheeler’s analysis that New Zealand has a structural problem in terms of balance of payments, savings, productivity and real investment. These are all manifestations of the existing “low risk” policy settings; the real risk is that nothing changes before it is too late for many exporters.”

“There is more to currency intervention than the spot market, as it has been demonstrated by many central banks around the world. There should be more than one lever and more than one target. The Kiwi dollar needs to be more than a one-way bet for speculators, and to move away from this, we need to target inflation and financial stability together by using policy tools in a complimentary manner."

“Discussion around the use of loan to value ratios (LVR), for financial stability reasons, is a major step that can crimp debt growth in a targeted way and avoid our exporters being sacrificed under the threat of yet another asset bubble. We have been calling for this since before the Global Financial Crisis, the RBNZ should be moving with urgency in this area.”

“The manufacturing export sector is the one of the highest paid sectors in the economy and it is arguable that higher earnings are a precursor to savings. Given that we need more jobs in the manufacturing sector, promoting investment in the sector drives productivity, earnings and savings and, incidentally, helps the balance of payments. Having said this, why is the manufacturing export sector treated as an optional extra in policy as opposed to the core strategy to solve our problems?”

“These changes require vision and action across monetary and fiscal policy.”

“Is anyone listening?”


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