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Public purse pays for Labour pipe dream

John Key MP National Party Finance Spokesman

07 December 2004

Public purse pays for Labour pipe dream

"Michael Cullen's policy to allow the Reserve Bank to intervene in the currency market is proving not only futile, but it's outrageously expensive as well," says National Party Finance spokesman John Key.

He is commenting after receiving a Treasury report under the Official Information Act, which says taxpayers are spending $1 million a week maintaining a currency intervention fund that is never likely to be used.

"According to the Reserve Bank Governor, the Kiwi dollar has never reached the trigger point for intervention, which is described technically as 'unjustifiably or unreasonably high or low'.

"For instance, the current strength of the Kiwi is blamed on the weakness of the greenback, so, while the Kiwi is worth more against the US currency, the New Zealand dollar itself is not considered to be overvalued.

"The same case was made when the Kiwi soared against the Australian.

"Treasury reports now show it's costing around $1 million a week to fund the additional reserves necessary to support Michael Cullen's intervention programme.

"Yet, in the same breath, the Governor concedes that there has been 'no time in the last 20 years when the central bank would have intervened'.

"If Dr Cullen had introduced this policy in 1984 instead of 2004, the taxpayer would have spent around $1 billion so far servicing a policy that's done little more than collect dust.

"The truth is that Michael Cullen might have had options when it came to the exchange rate, but he clearly chose the wrong one and we are all now paying for it," says Mr Key.


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