Alliance Raises More Question Marks Over Monetary Policy

Treasurer Bill English said the Alliance's economic policy released today would create further nervousness about monetary policy under a Labour-Alliance government and could explain Helen Clark's recent comments on competitive exchange rates.

"Ms Clark raised the possibility of two targets for monetary policy. While Dr Cullen stepped in quickly to dampen these suggestions, it now looks likely that she was trying to express some common ground with the Alliance.

"Even two objectives for monetary policy will not work, as Dr Cullen was quick to point out to his leader. The multiple objectives proposed by Jim Anderton would be chaotic and disastrous for this country's economic growth.

"The Alliance has just made it harder for Labour to stick to its line that nothing much will change if it is running the Treasury benches. No matter what Dr Cullen says, today's announcement means more uncertainty about exactly what New Zealanders could expect from Labour-Alliance coalition negotiations.

"Not only does the Alliance economic policy reflect views on monetary policy that were defunct until raised by Ms Clark, it also reflects ideas about regional development from the 1970s.

"Centrally-planned economies, with bureaucrats running banks and making investment decisions, have long been discarded. Extraordinarily, the Alliance even draws on the failed Development Finance Corporation as a model for its new government bank.

"It is clear from this economic policy exactly where Jim Anderton sees himself sitting around a Labour-Alliance cabinet table. He would be in charge of his new Ministry of Economic Development and Employment, making decisions about what regions and what businesses will benefit from government handouts.

"It is most unlikely that a few hundred million dollars spent this way will transform our economic outlook.

"New Zealand needs to respond to the knowledge economy if we are to improve economic performance.

"But any investment in this area must fit alongside other economic measures to encourage innovation and enterprise and ensure our economy is as competitive as possible.

"In particular, we must maintain the sound economic framework that has served New Zealand well over the last decade - a flexible labour market, low inflation, prudent fiscal policy, low broad based taxes and debt repayment.

"We can't take these for granted. The Alliance and Labour are committed to a less flexible labour market, higher taxes, and no debt repayment.

"We must pursue lower taxes, which are crucial to a culture of innovation and enterprise. And we must keep driving to make our economy more competitive. This year we have moved on producer boards and ACC. Ahead of us are the big infrastructure issues - roading management, water and wastewater management, local government, and business compliance costs.

"Along with these areas, we must consider how Government activity, which accounts for 35% of the economy, is contributing to productivity growth and the knowledge economy.

"Finally, we must also make sure that what the Government spends is spent in such a way that we can actually make a difference. We must break the cycles of disadvantage by offering more choice and flexibility to everyone who uses public services," said Mr English.

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