Reserve Bank puts up interest rates

In the past seven days, the Reserve Bank raised short-term interest rates.

While that may or may not cool house asset price inflation, it certainly will raise the borrowing costs of all companies and it will probably also cut into exporters' returns - and that's a worry for all of us who want to see more job opportunities, and better paying employment opportunities.

www.progressive.org.nz/modules.php?name=News&file=article&sid=2614

The frustrating thing is that we already had the very highest interest rates in the developed world. It is like a cycle: The higher and higher rates act to attract yet more buying of the NZ dollar from overseas speculators/investors - which in turn pushes the Kiwi dollar still further above fair-value - which further cuts into export companies' returns.

What's to be done?

One response by the Labour-Progressive government is to run a structural surplus: In other words, the government promises not to spend all of its income each budget but instead to put aside a significant portion of its annual income and dedicate it to either capital investments (like public transport and roading networks) or to help future governments meet their growing superannuation obligations (like investing millions of dollars a day into the NZ Superannuation Fund). Another response of the coalition government is KiwiSaver - getting more Kiwis into the habit of saving so we aren't so dependent on overseas capital.

Progressives should examine all issues, including financial transactions tax

My own view is that progressive-minded people should campaign for further measures - including the promotion of a financial transactions tax.

At the moment, the mathematics propelling the Kiwi dollar to its dizzying heights are pretty compelling.

Let's say you are a speculator in Amsterdam, Hong Kong or Tokyo, with a cool US$1 million you want to put into the "Kiwi Dollar Play". What you do is you leverage it up by borrowing US$10 million in Japanese yen. Then you invest the US$10 million in New Zealand dollar-denominated bonds - mainly government bonds. If all goes well, in numbers, the speculator/investor makes a tidy US$700,000 in net yield or 70% of their original investment because there is a 700 basis point difference between Kiwi and Japanese interest rates and investors are willing to bet a part of their portfolio investment in the Kiwi dollar play.

Of course there is a risk to the investor - the yen might appreciate - but for these big investors the portion of their overall portfolio that they invest in New Zealand is very small - often less than 0.1% of their overall investments.

Since these types of investment activity - borrowing yen or euro to buy Kiwi dollar bonds - do have negative implications for New Zealand society and its economy, it is reasonable for us to impose a financial transaction tax on trading. This raises revenue to invest in helping exporters and creating quality job opportunities:

There is always more investment needed in public transport, in transport and energy infrastructure, in skills training and in export market development. All Auckland Progressive Party members are welcome to attend a policy and strategy meeting on March 31, 10 to 1.30 at the Tongan Methodist Church in Grey Street in Onehunga to discuss these and other issues.

www.progressive.org.nz/modules.php?name=Content&pa=showpage&pid=113

National continues to promise to spend more than the government

The National Party is dangerous to jobs, dangerous to investment and dangerous to exporters.

The Reserve Bank's move had no effect at all on National - They carried on their strategy of promising to throw taxpayers' money at any issue in the news.

A National Government would, we were told, fund a multi-million re-development of Christchurch's Jade Stadium:

www.scoop.co.nz/stories/PA0703/S00183.htm

National would invest more to assist Maori reach their potential:

www.scoop.co.nz/stories/PA0703/S00176.htm

And at the same time, National would reduce income taxes, to the benefit primarily of those already on higher incomes, to the tune of $7.2 billion over four years.

It is the 1970s and 1990s all over again.
The cost of National's policy would be much higher interest rates and therefore much higher unemployment - no one should forget that under the last income tax-cutting National-led coalition, 90-day bank bill rates were sitting at over 9% (June Quarter 1998) and the unemployment rate hovered between 6% and 11% during the 1990s' decade - it never once dropped below 6% in nine years of Right Wing government.

www.scoop.co.nz/stories/PA0703/S00174.htm

April 1, 2007 - Progressive victories to celebrate

On April 1, the Progressive Party's 2003 Four Weeks' Annual Leave law change comes into effect to the benefit of working families:

www.progressive.org.nz/modules.php?name=Content&pa=showpage&pid=74

In the 2005 election, Progressive's manifesto promised to support using the gains of economic growth to raise the floor for married National Super to 66% of the after tax ordinary wage and that policy is due to take effect.

http://www.progressive.org.nz/modules.php?name=Content&pa=showpage&pid=131

Culture change requires law change

Congratulations to the 63 M.P.s that are expected today to support Sue Bradford's important Bill.

The fantastic speeches in Parliament, by Jim Anderton earlier this month, and by Maori Party co-leader Dr Sharples this week, underlined the direct link between changing the law as part of any successful overall culture-change strategy. If only the Maori Party had a lot more M.P.s - my Bill to raise the alcohol purchasing age could have become law by now!

www.progressive.org.nz/modules.php?name=Content&pa=showpage&pid=97

An evening of inspirational poetry and music

An evening of inspirational music and poetry featuring Elizabeth McRae, Alistair Paterson, Jan Kemp, Jack Ross, Philip Khouri, Riemke Ensing, Burundian Drummers, Yuko Takahashi, Setsuko Strang, Anna Rugis, Richard Green, Jeanette Miller, Ferne Rajanayagam, David Nalden and Ahmed Zaoui - this Friday, March 16 at 7.30 p.m. at St. Luke's Church, 130 Remuera Road (Tickets $20, phone 524-2452 or 521-2050. (Any profits to Amnesty International)

ENDS

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