Lower interest rates, a more competitive dollar and better jobs from Reserve Bank changes

Labour’s Reserve Bank Upgrade will lead to lower interest rates, a more competitive dollar and better jobs with higher wages, says Labour’s Finance spokesperson David Parker.

“The next Labour Government will upgrade the Reserve Bank Act by broadening its objective and giving it a new tool that will enable it to tackle our high overvalued dollar, help create jobs and keep interest rates low.

“Governments around the world have changed how they operate monetary policy since the global financial crisis. New Zealanders have a dollar overvalued by up to 15 per cent, a weakened export sector and mortgage rates that are among the highest in the developed world.

“Labour will make the following changes to the Reserve Bank Act as part of our Economic Upgrade:

1) Broaden the Reserve Bank’s objective beyond inflation and price stability to also assist to achieve a positive national external balance, which will boost economic growth and create more jobs.

2) Encourage the Bank to use its current tools differently, in a way that will help exporters and home owners.

3) Introduce a new tool - a variable savings rate or VSR - allowing the Bank to vary KiwiSaver savings rates (which would be universal under Labour) as an alternative to raising the OCR to take the heat out of the economy. This VSR would mean Kiwis would pay money to their retirement savings instead of higher mortgage payments to overseas banks.

“The independence of the Reserve Bank, and its ability to meet its inflation control target, are maintained.

“Labour’s changes will work with our Economic Upgrade focussing on investment, innovation and industry policies.

Alongside a capital gains tax, our KiwiBuild housing policy, universal KiwiSaver and reduced costs to businesses through NZ Power, Labour is offering an alternative that will help Kiwi families and ensure our economy can create better jobs and higher wages,” says David Parker.

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