Monetary policy change needed
With Dr Alan Bollard due to leave the Reserve Bank of New Zealand there is a clear opportunity to review and change the
Policy Targets Agreement between the Reserve Bank Governor and the Minister of Finance say the New Zealand Manufacturers
and Exporters Association (NZMEA). There is little prospect of any change to the Official Cash Rate in the Monetary
Policy Statement on Thursday, but a real debate on whether our monetary policy is serving New Zealand’s interests is
urgently needed.
NZMEA Chief Executive John Walley says, “Interest rates consistently among the highest in the developed world have
caused a long-term overvaluation of the New Zealand Dollar, hitting exporters hard. Monetary policy has been the biggest
reason for this.”
“Borrowing to finance spending, as evidenced by a structural current account deficit, is no way to run an economy.
Changes must be made to ensure export competitiveness.”
BERL Chief Economist Dr Ganesh Nana has suggested that the Reserve Bank’s target be changed to:
“The primary function of the Reserve Bank is to monitor the availability of credit to business to ensure the growth of
profitable export income-earning enterprise consistent with an external balance of payments target that reduces the
nation’s external debt.”
“This seems like a more sustainable approach,” says Mr Walley “Our living is earned by exporters in offshore markets and
import substitution: as it is elsewhere in the world, this must be the focus of our monetary policy.”
“Pretending what we have is working only defers the problem. We must act now to support our tradable sector.”
ENDS