Fundamentals wrong as exporters struggle

The Labour Party says flat business confidence, more job losses in the export sector and rising house prices are all signs of an economy that desperately needs modernising.

“The latest NZIER business opinion survey shows confidence is flagging, while new Real Estate Institute figures show house prices touching record highs,” Labour’s Finance spokesperson David Parker says.

“That is a sure sign that structural problems, not fundamentals, are driving the economy.

“Incentives in the economy are pushing people into debt-fuelled speculation in housing, rather than investing in exporting businesses.

“Jobs are being lost - 60 as recently as today at bio-tech exporter Flotech, with the company confirming that the strength of the New Zealand dollar is part of the problem.

“The IMF has analysed our currency and found our dollar is persistently over-valued, currently by about 15 per cent. That means increased pressure on exporters like Flotech and the loss of jobs at those businesses.

“Our interest and exchange rate settings were designed 25 years ago in an era when high inflation was the number one target.

“Today we have large overseas liabilities and a struggling export sector. We have to take the pressure off them or more profits and jobs will flow overseas,”

“Modernised monetary policy, more savings and pro-growth tax reform would all help change the structure of the economy so that housing remains affordable, exports grow and jobs are created with rising wages,” David Parker said.