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Prime Minister John Key is in “la-la land” if he thinks New Zealand can afford to continue with an overvalued dollar and a persistent current account deficit, Green Party Co-leader Dr Russel Norman said today.
Dr Norman was responding to comments from Mr Key who said that it was “economic la-la land” to propose reforms that would bring down the high New Zealand dollar and allow our economy to rebalance.
“The National Government’s current policy is not working for New Zealand. Our trading partners, using the tools proposed by the Green Party, are actively lowering their currencies while our government has done nothing,” said Dr Norman
“Major trading partners, including Japan, the US, and the UK have successfully used quantitative easing to lower their currencies. The IMF recently backed the Switzerland’s quantitative easing, saying the measure was “appropriate” in the circumstances.
“Other countries have introduced new domestic capital requirements on banks and controls on foreign capital to prevent wild swings in their exchange rates.
“Our exporters are being left high and dry by John Key’s economic management.”
Since the introduction of the Reserve Bank Act in 1989, New Zealand has run a cumulative $147 billion current account deficit. In the next five years, Treasury projects we’ll accumulate another $63 billion in current account deficits.
“New Zealand’s debt to the rest of the world is projected to grow every year under National’s policies. How do we pay for this debt? By selling our assets. By selling our farms. And by borrowing more,” said Dr Norman.
“That is no path to a more prosperous New Zealand.
“We can reduce the pressure on the exchange rate and the tradable sector by empowering the Reserve Bank with a mandate beyond inflation control to include managing exchange rate levels and volatility.
“There are a range of tools that work, which we can choose from.
“New Zealanders deserve a monetary policy that works for them. They deserve politicians that are willing to have a mature debate on the issue and put New Zealand’s interest first, rather than those of the currency traders,” concluded Dr Norman.