Bill English MP
National Party Finance Spokesman

19 July 2007

Cullen confirms threat of intervention on dollar

National Party Finance spokesman Bill English says Michael Cullen has upped the ante in his threats to change the rules the Reserve Bank operates under to ease pressure on the currency.

"His language has toughened up today. He's told Parliament that the Japanese housewives investing in the New Zealand dollar need to know the Government can use Section 12 of the Reserve Bank Act.

"That is considerably different from his claim that he is merely pointing out that Section 12 exists."

Invoking Section 12, which is generally reserved for a monetary policy crisis, would allow the Government to suspend its recently signed policy targets agreement with the Reserve Bank Governor and to incorporate some other main objective such as the exchange rate.

"If Dr Cullen intends his threat to be taken seriously he needs to outline the conditions which would trigger intervention, or state clearly that he has no intention of intervening.

"Dr Cullen's credibility is stretched because so far his sabre rattling on things like a capital gains tax, ring fencing tax losses on housing, and the mortgage levy have come to nothing.

"Dr Cullen now appears to be pinning his hopes on a select committee fixing this monetary mess of his own making. Meanwhile, the dollar and interest rates keep rising while he acts like a heckler from the sidelines.

"The outgoing Finance Minister's empty threats continue to erode what little credibility he has left. "

ENDS

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