IMF shows it's time to stop fighting yesterday's war
The IMF's latest World Economic Outlook report (WEO) shows that New Zealand needs to move beyond using a 20 year old monetary policy and join the modern world to protect jobs and the economy, Green Party Co-leader Dr Russel Norman said today.
The WEO report notes "declining inflation rates, growing slack, and sizable fiscal adjustment in the advanced economies argue for maintaining very accommodative monetary conditions, including unconventional measures".
The IMF notes that most of our trading partners are using tools that lower their currencies and address financial stability issues, and says "the concern is that the vast acquisition of assets by central banks [as a result of quantitative easing] will ultimately mean a rise in the money supply and thus inflation. However, as discussed in previous WEO reports, no technical reason indicates this would be inevitable. Central banks have more than enough tools to absorb the liquidity they create."
"National has defended its do-nothing approach to the high New Zealand dollar on the basis of the risk of inflation, but as the IMF notes inflation is not the risk facing the world, or New Zealand," said Dr Norman.
"National's high dollar strategy is slowly bankrupting New Zealand and costing Kiwi jobs.
"While the rest of the world adopts modern monetary policy, the National Government is doing nothing. That's costing thousands of manufacturing jobs and leaving New Zealand deeper in debt," said Dr Norman.
New Zealand's current account deficit is already at 5% of GDP and rising, and our net debt is at 75% of GDP and rising.
"Our trading partners are artificially lowering their currencies thus making ours higher. That makes it harder for our exporters to compete and results in local businesses being undercut by imports," said Dr Norman.
"The National Government claims that the high dollar is a good thing because it means cheaper flat screen TVs. The truth is that it is reducing our export earnings, costing jobs, and creating an unsustainably wide current account deficit that New Zealand funds by borrowing more overseas or selling assets to foreign buyers.
"National can scare-monger about inflation to justify its high dollar strategy that is killing manufacturing, but inflation isn't the problem - jobs and New Zealand's growing overseas debt are.
"The question is whether New Zealand continues to do nothing and lose jobs as the actions of other countries destroy our manufacturing sector because we won't change our 20 year old monetary policy, or whether we join the rest of the world in the 21st century.
"The Greens have proposed a suite of measures to put downward pressure on the New Zealand dollar that includes lowering interest rates, introducing new tools to stop housing bubbles, and quantitative easing.
"Together, these policies would save jobs, give our manufacturers a fighting chance, reduce the amount we borrow from overseas, and get New Zealand's natural disaster safety net back in place," said Dr Norman.
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