In a speech to Federated Farmers today Labour leader Phil Goff  has indicated that at least one of the major political parties appears to be getting the message, saying:

“… our Reserve Bank policy targets are not well designed to produce a stable and competitive exchange rate, nor to keep interest rates as low as possible. In fact, it often operates the other way round. When there is a surge in domestic demand, the policy response is to increase interest rates. Ironically, higher interest rates attract even more inflows of foreign capital, which then gets lent out and sometimes causes even stronger domestic demand. So New Zealand’s overseas debt increases inexorably, while monetary policy punishes our most productive businesses and first home-buyers - just about the two sectors that we least want to affect.”

The full text of his speech is available here.

“Alan Bollard deserves to be congratulated for quietly leading the world’s central banks towards a new tool for monetary policy that might help New Zealand avoid the tyranny of a high official cash rate (OCR) killing our export sector.”

From The NZ Herald

“Statistical evidence produced to the inquiry showed that while most interest rates had fallen since the global financial crisis began late last year, major banks had not passed on the full impact of OCR cuts into short-term interest rates charged to customers,” says Labour finance spokesperson David Cunliffe of the results of the parliamentary banking inquiry by Labour, the Progressives and the Greens.

Which just goes to show that Dr Bollard is probably wasting his time trying to give the Banks advice on how to run their businesses. They know what they’re doing. They’re making money.

“We would encourage the banks to avoid any return to riskier mortgage lending practices,” says Dr Bollard. Well, we all know how well the Banks take that type of encouragement and advice, so let’s not hold our breath.

“New Zealand has had a recession, and the pick-up is slower and more vulnerable - a difference financial markets do not appear to appreciate.

“This is particularly evident in the relatively stable cross-rate on foreign exchange markets. If financial markets can’t see the differences, they will eventually lose money, and it will hurt the New Zealand economy.”

So says Alan Bollard today. So it’s official. The only thing Reserve Bank Governor Alan Bollard can do to stabilise the exchange rate is to plead with Forex dealers, asking them essentially to leave us alone.

So that’s our monetary policy in a nutshell: we beg people not to mess up our economy.

Congratulations to John Whitehead for his characteristically candid report on the few remaining options we have unless there is radical change, says PEC spokesperson Selwyn Pellett.

“Treasury’s 2009 ‘40 year outlook’ report delivers a message that basically says: “grow up New Zealand, the soft options have gone”. We just hope our politicians have the wisdom to read it from cover to cover and absorb the reality it portrays,” says Pellett.

“What it doesn’t do is talk of radical change in how we could increase our income and of course that’s where exporters are so critical to our future and solving this imbalance.” read more »

“If productivity growth were to improve by 2 per cent a year, labour force participation was 3 percentage points higher than it is today, and new migrants added 15,000 to national population annually instead of the 10,000 forecast, net debt would rise to 146 per cent of GDP by 2050. “This is still an unsustainable fiscal position,” the report says.”

Treasury paints a picture of a Third-World future for New Zealand.

From The NZ Herald

“Another plunge into global recession in 2010 or 2011 is being tipped by expatriate New Zealand economist Robert Wade - unless governments tackle the underlying causes of the past year’s crisis.”

From The NZ Herald

So the recession is over. At least Bill English is happy to say so and will spend the next month telling us we are out of recession and it’s business as usual. That’s fantastic news, or at least it would be if he was right.

But, says Selwyn Pellett of the Productive Economy Council, unfortunately he’s wrong.

“Prior to the recession 30 percent of our GDP was from the export sector and that 30 percent is still very much in recession,” says Pellett. read more »

As the dollar hits 76.4 cents to the US dollar, we are told there is nothing we can do to protect our own currency and that’s just not true. “Why are New Zealanders not being told the truth”, says Selwyn Pellett spokesperson for the Productive Economy Council. 
 
“The public are tired of hearing “Oh it’s the US Dollar or the Pound” and “We are in the same position as everyone else”.  Well this may serve the needs of banks and the politicians but it’s just not true.  In the 22 day period from the 1st of August the NZ Dollar has appreciated 5.1% against the US Dollar with a 0.1% improvement in GDP, while Singapore achieved a 15% improvement in GDP with just a 1.61% increase in its dollar against the US Dollar, and Taiwan’s currency decreased 0.6% in the same period. So let’s stop telling the New Zealand public we are helpless and can’t do anything.  The lack of leadership on this issue puts us in danger of becoming another Iceland.” says Pellett.
  read more »