Wood processors call for monetary reform

Media Release
Wood Processors Association

26 July 2007

Wood processors call for monetary reform

In light of a further increase in the OCR announced today, wood processors are calling for a major review of monetary policy. “By giving the Reserve Bank the OCR as the only tool to manage inflation, the country’s export sector is put at risk by the effect this tool has on exchange rate”, says Wood Processors Association chairman David Anderson.

While conceding the Reserve Bank has an objective to achieve low inflation, Anderson says that the policy is clearly not working. Governor Bollard has increased the OCR constantly over the past two years and the housing market is still as inflated as ever.

In the meantime businesses have gone to the wall or moved production overseas, and those who have stayed are facing lower profits and an uncertain future. The wood processing sector is losing an estimated $500m annually, which is profit not going back into the New Zealand economy.

Anderson urges the Finance and Select Committee enquiry on monetary policy to ensure a whole of economy view is taken, not just the narrow focused inflation rate focal point of the current policy. Anderson says the existing attention on interest rates causes commentators with vested interests to talk up the currency, which is severely harming the export-based economy that New Zealand is dependent on.

Anderson believes New Zealand exporters are innovative with new products and production systems being introduced into commodity-based products. However, investment into new products and systems requires some degree of certainty over the medium term and this is not being afforded exporters at the moment.
It’s time for a significant and rapid change says Anderson, or more redundant export-based facilities will be a legacy of this flawed policy.

ENDS

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