Labour's Reserve Bank Policies

Income Equality Aotearoa New Zealand Inc. ¾ Closing the Gap

There are some very good points in the recently released Labour proposal on the Reserve Bank policy but..... says Peter Malcolm National Secretary of “Closing the Gap”- Income Equality Aotearoa New Zealand Inc

We are pleased to see Labour’s proposed Reserve Bank policy is to retain money in New Zealand, by the way of savings rather than to export the money in mortgage interest margins to mainly overseas banks, during times when inflation needs to be controlled. And a compulsory Kiwi Saver scheme has always been a good idea, but only when it is coupled with significant increases in the minimum wage, so that all can afford the contributions and the extra contributions, when necessary.

Our great concern is the absence of any targets for unemployment, which suggests that the Labour party is still wedded to ideas of Rogernomics and the failed doctrine of a ‘trickle down economy’ that our nation’s current unequal society can attest to.

When employment is seen as the major way in which financial resources are distributed in society, there has got to be enough jobs for all those who need them. And in a fair society the jobs would be well-paid.

But in the Labour party’s proposal, the only time employment is mentioned in the document is in a proposed amendment,

‘Labour will amend the Reserve Bank Act to read: “The primary function of the Bank with respect to monetary policy is to enhance New Zealand’s economic welfare through maintaining stability in the general level of prices in a manner which best assists in achieving a positive external balance over the economic cycle, thereby having the most favourable impact on the stability of economic growth and the level of employment.”’

As such, employment is a possible by-product of the policy and not part of the policy itself.

Since the original inflation target was given to the Reserve Bank in 1989, it appears to have used the monetarist concept of a “natural level of unemployment” to ensure a low wage economy with little or no pay rises (at least for the workers). Since the mid-1980’s we have averaged an unemployment rate of over 6%. Our lowest rate was 3.65% in the mid-2000’s, which showed that people worked when jobs were available.

Our country’s huge inequality gap can be chiefly attributed to three neo-liberal decisions: setting an independent Reserve Bank a sole low inflation target; introducing laws that disempowered Unions; and draconian welfare cuts in the early 1990’s for the almost permanent 6% victims of the other two policies.

Until such time as a Labour Government specifically requires the Reserve Bank to seek a target unemployment rate (of below 3%) at the top of its criteria, we will know that we have a party that is still Rogernomic at heart, regardless of its rhetoric. What we need is one that has a genuine desire to help the vast majority of New Zealanders who have missed out on any real rewards over the last quarter century.
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