20 February 2013

Reserve Bank ignoring growing economic imbalances

The Reserve Bank continues to ignore growing imbalances in the economy and the slow hollowing out of the productive sector, said Green Party Co-leader Dr Russel Norman today.

Dr Norman was responding to the Reserve Bank Governor’s speech to the Manufacturers and Exporters Association today.

“The Governor today restated the Bank’s siloed thinking about the wider economy, failing to show leadership around how the Reserve Bank can use the tools available to it to help rebalance the economy,” said Dr Norman.

“Graeme Wheeler outlined important long-term steps for our economy around savings and labour productivity but completely dodged how he can help today with the tools available to him.

“Good jobs are worth fighting for.

“This current economic recovery is being led by the property and retail sectors rather than the manufacturing, import competing, and export sectors.

“The current account balance – a measure of how we’re living within our means – is in deficit and forecast to deteriorate further.

“The Reserve Bank has chosen to ignore the quality of the emerging economic recovery and has been slow to develop new tools to prevent history repeating itself – a credit-fuelled housing bubble and ballooning current account deficit.”

The Green Party have a number of proposals to help rebalance the economy including: a lower Official Cash Rate (OCR), complementary tools to manage house price inflation, a comprehensive capital gains tax (excluding the family home), and limited quantitative easing to help finance the Christchurch rebuild.

“These kinds of tools are being used all around the world and are being advocated for by organisations as disparate as the IMF and UK Financial Services Authority. But our Reserve Bank appears to be trapped in a time warp from the 1980s; shoulder pads have had their day, and so has targeting monetary policy solely at inflation,” said Dr Norman.

Link to Reserve Bank speech:

http://www.rbnz.govt.nz/speeches/5150125.html

ENDS

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