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Time For A Sustainable Low Exchange Rate Policy

3 March 2000


The government has correctly realised that the thrust of economic development needs to be targeted to the regions which have suffered heavily over recent years, says Jim Howard, United New Zealand primary industries spokesman and 1999 election candidate for Rangitikei.

“However the government still fails to understand that what has caused the current regional recession and more importantly what is required to correct the problem. The answer is not to use taxpayers funds to create job rich ventures but to build a sustainable export friendly economy,” says Mr Howard.

He says this could realistically be achieved by loosening the Reserve Bank controls on interest and exchange rates.

Analysis by Christchurch business consultant Phil Verry titled ‘National Development strategy Derived from a Re-engineered Monetary Policy’, advocated a sustainably low exchange and interest rate economy, by retaining within New Zealand the surcharge on interest rates which is presently paid to overseas lenders.

“His analysis highlighted how damaging to the New Zealand economy are the present reliance on high interest and exchange rates, to control inflation,” says Mr Howard.

He says that unfortunately the Reserve Bank is not moved by this analysis.
“Not surprisingly the Reserve Bank which has been and still is implementing these polices for the government gave Mr Verry’s proposals the thumbs down.

“But sooner or later the country must realise that the economy is heading on a one-way road with no exit, continuing to build unsustainable overseas trade deficits. A new direction is urgently needed and the change of government is an ideal time to seek and implement that new direction.

“Now while everyone sees the benefits of the co-ordination of low exchange and interest rates to the national, export and regional economies, is the time to ensure that these potentially favourable economic conditions are bedded in permanently,” concludes Mr Howard.

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