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Reserve Bank confirms over-valued dollar to blame for crisis

25 October 2012

Reserve Bank confirms over-valued dollar to blame for manufacturing crisis

The Reserve Bank Governor Graeme Wheeler’s unwillingness to lower the Official Cash Rate (OCR) despite acknowledging the devastating effect that the over-valued dollar is having on Kiwi jobs is further confirmation that the Reserve Bank needs modern tools to better do its job, Green Party Co-leader Dr Russel Norman said today.

“Governor Wheeler is dead right when he says ‘the high New Zealand dollar is undermining export earnings and encouraging substitution toward imported goods and services’. We urgently need to get the dollar down to a fair level with a lower OCR and other tools,” said Dr Norman.

“Because of the over-valued exchange rate, our exporters are unable to compete overseas and local businesses are being undercut by cheap imports. As a result, we have lost 40,000 manufacturing jobs and New Zealand has the second largest current account deficit in the developed world.

“Governor Wheeler’s statement suggests that he is prevented from lowering interest rates by the lack of tools to control housing speculation.

“Our manufacturers and exporters are being sacrificed because National’s outmoded monetary policy prevents the Reserve Bank from taking a sophisticated approach to lower interest rates and, hence, the dollar without triggering a housing bubble.

“With a modern monetary policy, such as that proposed by the Greens, we could get interest rates and the dollar down to internationally competitive levels and create jobs without causing another housing boom.

“National’s failed neoliberal approach is to stand by with its hands in its pockets while businesses close and Kiwis lose their jobs.

“No wonder Kiwis think that National is failing on jobs. The over-valued dollar is the most destructive force in the New Zealand economy at present; it is destroying thousands of Kiwi jobs. Yet National has no answer.

“New Zealanders deserve better. They deserve a government with a monetary policy fit for the times, not National’s dogmatic adherence to a failed neoliberal doctrine,” said Dr Norman.

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