Dr Nana on the Money: Productive Economy Council

Dr Nana is Right on the Money, says The Productive Economy Council

Dr Ganesh Nana, chief economist at Business and Economic Research Limited, is right on the money with today's comment's that we need the Reserve Bank to step in to provide low cost business loans - in effect, printing money says Productive Economy Council (PEC) spokesman Selwyn Pellett.

"It's our sovereign right to do so and right now it makes perfect sense to all but the foreign banks," he says.

Pellett goes further saying that Kiwi Bank needs to be recapitalized and used as a macro-economic tool to help control the price of money to our productive sector ,which Reserve Bank Governor Dr Bollard clearly doesn't control any longer. If we are to have an export led recovery then we must not allow the banks to hijack the interest rates and the closely coupled exchange rate.

"The farmers and the elaborately transformed exporters (the hi-tech sector) are all on the same page right now and everyone is calling foul over the banks' behaviour and are requesting that Bill English steps in and takes control," says Pellett.

"The issues are well known and yet nothing happens and you really have to ask why?" he says .

"Unless the farmers, the entire export sector, Dr Bollard, Dr Nana, the Productive Economy Council and the New Zealand Manufacturers and Exporters Association (NZMEA) are all wrong then Bill English must act to prevent our recovery being stalled by the banks."

Dr Nana's solution of a Singaporean "managed exchange rate" model, allowing the market to influence the exchange rate, but having the Reserve Bank back-stop any shifts outside target boundaries is also supported by the PEC.

"The exchange rate solution proposed by Dr Nana is perfect but we also need to control inflation and that can also be achieved by copying Singapore," says Pellett.

"A variable contribution to compulsory Superannuation will solve our future inflationary threats and create deep capital markets at the same time," says Pellett.

"If inflation is under control then we gradually step up to a target Superannuation of say 6%. Once at 6%, if inflation takes off the Reserve Bank can increase contributions by half a percent until inflation is back under control. Then in times like we have now we reduce the contributions to stimulate the economy," says Pellett. This inflationary control is supported by both the NZMEA and the PEC.

The big difference is the money remains in New Zealand and stays in the tax payers' superannuation accounts instead of being given to Foreign Banks to be repatriated back home, says Pellett. This will also provide price stability without negatively effecting the productive economy via the increases we see in the exchange rate or Current Account Deficient. Collectively this means no looming downgrades and lower associated risk premiums.

"What New Zealander, acting in the interests of this country would not prefer this model combined with Dr Nana's proposed exchange rate solution to our current monetary policy? Bill English and National will become national heroes if these policies are implemented," says Pellett.

"It's time for a massive change in our economy and if we don't do it now in the middle of the largest recession since World War II then when will it ever happen?", he asks.

To quote Dr Nana "We need a change in our economic commentary and policy advice around building an export country rather a country fixated with finance markets and house prices."

"We have some bitter pills to swallow if we ever want to regain economic sovereignty but the ground swell is out there saying, "now is the time to move". Those who want a return to business as usual should ask themselves how asset inflation is going to provide the jobs we need for Gen Y - and pay off the mountain of foreign debt we have created with our asset bubble - if we have killed our export sector with inflated interest and exchange rates," says Pellett.

"It's time we got serious about getting the controls of our own economy back in our own hands and that's called economic sovereignty," says Pellett.

ENDS

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