Productive Economy Council Slams the Courage of the Select Committee

"In a period of unprecedented economic turmoil we have a government that is prepared to waste $9 million on an anti-smacking referendum that John Key says he will almost certainly ignore, while Parliament's Finance and Expenditure Select Committee now says they won't entertain an enquiry into banking practices in New Zealand. Where's the sense in that?" asks Selwyn Pellett, the spokesperson for the Productive Economy Council.

The National members of the Finance and Expenditure Select Committee had previously given every indication that they would support an enquiry, but pulled back from supporting it at the last minute, thus denying New Zealanders the chance to have Parliament answer questions as to why interest rates, especially floating rates, seemed to lag behind cuts in the Official Cash Rate.

The evidence is now in plain view that New Zealand has sold its Economic Sovereignty. A review will expose just how much damage the combination of questionable banking practices, FX trading and monetary policy is having on New Zealand's tradable economy. The fact is that our net investment balance (what we have invested overseas compared to what foreign entities have invested in New Zealand) is now over 98% of GDP, up from 93% in December 2008.

"This data shows that we are selling New Zealand paddock by paddock and house by house as we all get caught in the banks' game, enabled by poor monetary policy. The $31 billion increase in farming debt in the last ten years is but one example of bank lending practices inflating assets that we already own as a country. We didn't increase the farming output by the 17% each year in increased debt," says Pellett.

We have been conditioned to believe that New Zealand must pay a premium for money and so we become a great place to "play the currencies" as the rest of the world enjoys ultra low interest rates. The carry trade (with all the banks resources behind it) pours money into New Zealand and in turn pushes up the exchange rate creating huge profits for the banking sector. Everything else in the productive economy frankly pales into insignificance compared to the effect of the exchange rate. With roughly $40 billion in exports in the last year, for every 1% increase in the exchange rate New Zealand suffers a $200 million loss in income as a result. That's not .55 to 56 but .55 to . 0.5555. You can imagine the impact from .50 to the USD to the current .65, says Pellett. People need to wake up as they complain about a wasted million here and there and yet this represents billions of dollars of lost income.

"How can New Zealanders be happy with the top four banks making more profit than the rest of the NZX 50 put together?" asks Pellett.

We need to ask why we can have a referendum on the anti-smacking law and yet the National dominated Select Committee has decided we don't need an enquiry into banking, which affects far more New Zealanders every day.

ENDS

About PEC
The Productive Economy Council represents a growing community of people that wish to see New Zealand return to the upper end of the OECD in terms of GDP per capita. It was founded by four of the former Trustees of the Hi Growth Project including current President of the Hi Tech Association Wayne Norrie, former executive of the Hi Growth Project, Garth Biggs, Former Chairman of the Hi Tech Association and entrepreneur Selwyn Pellett and APEC Business Advisory Council, Co-chair Technology &Information Working Group, John Blackham.

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