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“She’ll be right” not enough for monetary policy

September 19, 2008
Media Release

“She’ll be right” is not good enough for monetary policy - EPMU

The Finance and Expenditure Select Committee’s decision to keep the status quo on monetary policy is a lost opportunity for New Zealand’s manufacturers and workers, says the Engineering, Printing and Manufacturing Union.

The decision means inflation control will continue to be restricted to manipulations of the official cash rate only – a situation that has meant exporters and manufacturers being punished for speculative booms in other sectors of the economy.

EPMU national secretary Andrew Little says the decision to keep the current monetarist model is a disservice to New Zealand.

“By calling for improvements in productivity the select committee has obviously recognised that the single focus on interest rates doesn’t address all the relevant needs of the economy.

“And even though the select committee is correct to identify improving productivity as critical, it is pretty hard to do so when monetary policy favours investment in unproductive asset classes over productive activity like manufacturing.

“Productivity policy needs mates, too.

“Using interest rates to control inflation only leads to a high dollar which in turn leads to our export manufacturing being priced out of the global market.

“Even though the OCR is finally coming down we’ve seen years of productive manufacturing suffering from monetary policy focused on attempts to control inflation in unproductive areas of the economy such as property speculation.

“In many cases our members have seen their wages disappear through imported inflation in the form of food and oil price rises only to then face losing employment due to manufacturers having to close their doors because of the artificially high dollar.

“If our manufacturers and exporters are going to be able to take full advantage of the next upswing in the economy and invest in skills and productive capital then we need to ensure they are not hobbled by monetarist policy.

“Simply saying ‘she’ll be right’ is not good enough.”

The EPMU represents 50,000 New Zealand workers across 11 industries and is New Zealand’s largest union in the manufacturing sector.

ENDS

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