CPA applauds Reserve Bank’s move

Media Release

19 June, 2007

CPA Australia applauds Reserve Bank’s move to protect vital export sector

The New Zealand branch of CPA Australia, one of the world’s largest accounting bodies, today indicated its support of the Reserve Bank’s suspected intervention to lower the value of the New Zealand dollar yesterday.

The organisation, who represents the diverse interests of more than 112,000 finance, accounting and business professionals in 98 countries, believes that the Reserve Bank correctly has the mandate from government to contain rising inflation and to take steps to correct the currency if they consider it has reached an unsustainable level, both high and low.

David Searle, CPA Australia New Zealand branch council member and Partner Audit Services, Staples Rodway, points out that the clear benefits of maintaining the dollar are to the export community, saying, “The health of our economy is dependant on exports and it is good to see that the Reserve Bank is looking to protect this sector.” Searle admits that, while good news for exporters, the attempted adjustment may impact the economy overall, saying, “With the level of the Trade Weighted Index (TWI) where it is, the New Zealand economy is likely to be weakened going forward.”

Pundits have wryly observed very little movement in the New Zealand dollar, which fell half a cent against the greenback yesterday but then peaked overnight to 75.75 US cents, settling around midday today back to 75.44 US cents. CPA Australia New Zealand branch president Chye Heng is not so fast to judge saying, “Although the currency’s level has remained largely static after both interventions, we do not know to what level the dollar would have headed had nothing been done.”

David Searle agrees, and believes this second attempt in less than a fortnight signals the Reserve Bank’s commitment to inflation limitation and cautions that this manipulation may not be the last, saying, “The Reserve Bank is sending a very clear message that they believe the currency to be over-valued and that this method of exchange-rate correction is valid moving forward.”

ENDS

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