Bill English MP
National Party Finance Spokesman

16 April 2007

Govt spending plays part in dollar rise

“Labour’s spending and its plan to accelerate spending are two of the reasons behind a relentless rise in the Kiwi dollar,” says National Party Finance spokesman Bill English.

“The Reserve bank Governor has pointed out that ‘expansionary’ fiscal policy is set to keep interest rates higher for longer. Those attractive interest rates are clearly behind the rise and rise of the Kiwi.

“Right now our dollar is a sure bet for speculators, and will remain so as long as Labour’s big spending programmes continue to underpin consumer demand.

“And all the tea leaves are telling us that this year’s Budget will add more fuel to the interest rate fire.”

Mr English says Michael Cullen has been trying to downplay the impact of his spending, and pretends that there is nothing he can do, preferring instead to blame people buying and selling property.

“But he is choosing to ignore the Reserve Bank’s blunt warnings. Instead, he’s left it up to Governor Allan Bollard, whose secret meetings with the trading banks have coincided with fixed-term mortgage hikes.

“So far, Dr Bollard has not explained to the rest of the market why he chose to speak to selected members of the banking industry and not others.”

Mr English says home owners should brace themselves for further rises as Michael Cullen prepares to “spend the money he’s telling them to save”.

“Allan Bollard has his foot on the brake and Michael Cullen’s got his on the accelerator.

“Unless the Finance Minister shows some restraint, interest rates will remain higher for longer, and the dollar will remain at levels that are eating into our export earnings.”

ENDS

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