Monetary and fiscal policy headline Labour’s economic package – 18 November

Monetary and fiscal policy changes designed to reduce exchange rate volatility are the high point of Labour’s economic policy announcement say the New Zealand Manufacturers and Exporters Association (NZMEA). Labour have proposed the removal of tax harbours that exacerbate domestic inflation and measures to widen the Reserve Bank’s objectives to include the health of the export sector, exporters on the Board of the Reserve Bank and countercyclical tools along with the Official Cash Rate.

NZMEA Chief Executive John Walley says, “A commitment to monetary and fiscal policy that supports the export sector rather than overvaluing the New Zealand dollar is a necessary precursor of investment in the tradable sector. Jobs will follow that investment. It is also good to see the necessary flow on through changes in the make up of the Reserve Bank Board and in the Reserve Bank Act to provide the freedom to use regulatory tools against domestic inflation.”

“It is worth noting that a one percent rise in New Zealand’s exchange rate costs exporters approximately $200 million a year, and with the volatility we see in the graph above, this cost and the knock on consequences to the structure of our economy are immense.”

“Removal of the capital gains tax harbour will help to direct funds, provided by the equally important savings policy, towards productive activity rather than static and jobless assets Add in the research and development tax credit and local preference, and we are starting to see a fairly coherent and comprehensive economic reform package for New Zealand, similar to what we see overseas. This is what is needed to increase export earnings.”

“New Zealand has been in a policy time warp for the best part of 20 years; what was necessary and mainstream in the 80s has moved on. The world in the midst of a financial crisis and growing debt sensitivity has changed and a different policy response is necessary.”

“Exchange rate stability, production and innovation incentives have been the long-term policy positions of the NZMEA. It is good to see some of these policy points being picked up – more on this can be seen at www.changenz.co.nz.”

ENDS

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