NZ First Snake Oil No Cure For High Dollar

Press Release by ACT Leader John Banks

Thursday, September 6 2012

ACT Leader John Banks today expressed sympathy for those who will made redundant at Tiwai Point and admonished Winston Peters for taking advantage of the situation with his currency snake oil.

“Despite his claims, Mr Peters’ Reserve Bank of New Zealand (Amending Primary Function of Bank) Amendment Bill will not solve the problem of our high dollar,” Mr Banks said.

"The Reserve Bank ultimately has only one tool for influencing the economy. It can use low interest rates to increase the money supply, or high interest rates to reduce the money supply.

"An increased money supply might reduce the dollar, but this relief will be temporary as inflation drives up exporters' costs and leaves export workers no better off.

"The United States Federal Reserve has objectives similar to those proposed in Mr Peters' Bill. They increased the money supply to stimulate their economy after 9/11 leading to a housing bubble, and the rest is history.

"Our high dollar is caused by a combination of high commodity prices, high government expenditure, government borrowing, and large demand for mortgages.

The real solutions are to reduce government borrowing and expenditure, and relieve the pressure on the housing market through significant RMA reform,” Mr Banks said.

ENDS

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