Fatalistic for some, fatal for others…

Fatalistic for some, fatal for others…

The Canterbury Manufacturers’ Association says that policy settings must address domestic inflation. Fix domestic inflation and the exchange rate follows.

“Despite what Dr. Cullen has said in the media this week, the Government is not powerless in halting the climb of the dollar or at least limiting its impact on exporters”, says Chief Executive John Walley. “The Government and the RBNZ have the power to implement measures that will help curb domestic inflationary pressure and lower interest rates as a precursor to a correction in the exchange rate”.

“The characterisation that we are a “candle in wind” is a self fulfilling position that will be fatal to our exporters. Yes we have a small currency, yes it tends to be volatile and yes there is a flood of liquidity on global markets – but all that means is we must try harder to set policies that dampen currency volatility, not exacerbate it”.

“Fixing things begins with the conviction that they can be fixed”.

Mr. Walley says that there are a number of direct actions open to the Government and the RBNZ.

“One option is tighter regulation of the banking sector, particularly those that do not follow the RBNZ’s lead on monetary policy. The perceived exchange rate risks would increase if the RBNZ were to be a little more unpredictable from time to time, and cease the practice of making Monetary Policy Statements. Further, the Government could show care to avoid inflationary fiscal, emigration, and social policy when there are inflationary pressures in the economy. If, as many suppose, house price inflation is the root of the problem, then looking at policies that will take the heat from house prices might be a place to start – lending and borrowing equity ratios, taxation on speculative activity, land supply, planning rules and RMA issues are all directly relevant in this regard”.

“The calls to ‘get used to a high dollar’ and build a future on ‘innovation’ can also be consolidated into a policy response. The Canterbury Manufacturers’ Association has consistently called for a supportive taxation system, long enjoyed our competitors in other jurisdictions, for investment in research and development, plant and equipment, people development and the development of new enterprise. These are all things that operate at a practical level and are more useful than trotting out the same old axioms.”

“It may come as a surprise to the Government but our manufacturers left standing are innovative. The ones that failed to innovate are not here any more.”

“We need backbone and leadership to fix this problem, recognise that a broad, coherent policy response is both needed and possible and get on with it – future living standards hang in the balance.”

ENDS

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