web analytics

Granny says – you can’t do that

Written By: - Date published: 9:30 am, September 21st, 2012 - 16 comments
Categories: economy, exports, jobs - Tags:

The ever forward looking and even-handed Herald devotes its editorial to attacking Labour for supporting Winston Peters’ Bill to make some small changes to the Reserve Banks’ objectives to bring them more in line with Australia’s. Leaving aside the fact that the Herald hasn’t attacked NZF or the 3 other parties who support this, only Labour, isn’t it time Granny got with the programme?

You only need read the business and business opinion pages in the Herald itself to get what is happening. Of the 10 most-traded currencies in the world (and it should ring alarm bells that we’re in that grouping at all), New Zealand has the narrowest monetary policy. Our Reserve Bank considers just one thing in making its interest rate decisions – the impact on inflation. None of the other currencies have such narrowly-focused monetary policy.

Granny heartily approves. But Granny, like National, is fighting yesterday’s war. Inflation in general isn’t a problem any more. We have 1% inflation at the moment, and it won’t get above the 3% top of the Reserve Bank’s target bracket in any of the forecasts for many years. In fact, if big economies weren’t printing money like crazy and inducing some global inflation, we would probably have deflation now.

Now, lets look at those other largely-traded currencies again. These are the currencies with which ours is predominantly traded. The most-traded – US, Euro, Yen, Pounds – are all engaged in forms of quantitative easing. That means that their central banks are creating more of those currencies (decreasing their value/causing minor inflation) – which they then to buy their government’s own bonds, which lowers interest rates in their countries. Both actions decrease their exchange rate and increase ours in turn.

The rest of the top ten have wider objectives for their Reserve Banks than just inflation – they have to consider jobs and growth too. Some are also involved in forms of quantitative easing. The net effect: all these governments are attacking to keep their currencies low so their manufacturers can compete (and it certainly seems to be working for the US, which is seeing manufacturing grow to China’s cost).

Of course, when their currencies go down, ours goes up. They’re running beggar thy neighbour strategies – and we’re the neighbour.

So, what should we do? Well, we’ve got to play the game too. We could undertake quantitative easing – everyone else is doing it and the sky isn’t falling. At the very least, we should lower our official cash rate to make it less attractive for foreign ‘hot money’ to invest here. That would help bring our currency down and let our businesses compete on the export markets and against importers. But to do that, the Reserve Bank would have to be allowed to consider more than inflation – it should have to look at the whole economic impacts of its choices. We should also bring in policies to stop a housing bubble, which is bad, inflationary, and draws in hot money from overseas – policies like capital gains tax. That would allow further reductions in the OCR.

Right now, the Reserve Bank is like a doctor confronting a patient with a range of maladies. But it is only allowed to worry about whether or not a patient is hyper-ventilating – and its only remedy is strangulation. Meanwhile, other countries are giving their doctors the skills and tools to really fix their patients. And (this is where the metaphor breaks down) as they make their patients healthier, it makes ours sicker.

For some reason, Granny Herald thinks that’s just fine. Maybe because Granny Herald isn’t an exporter. Maybe because the Herald isn’t a paper that gives a damn about the 40,000 manufacturing workers who have seen their jobs disappear in the last 4 years.

16 comments on “Granny says – you can’t do that”

  1. tc 1

    WTF would granny know about Finance and economics except rabbiting from a supplied script !

    The manufactured ACC crises should leave no-one in doubt they’re part of the CT NACT spin machine, this is further evidence.

    JA and Fo’S with probably give the same telling off to labour if they haven’t already.

    I don’t bother with it anymore, plenty of other high quality stuff online like this blog…was it an unsigned editorial which effectively means it’s usually signed by A. Hollowman.

  2. Lanthanide 2

    Here’s a policy to help fight the housing bubble while also helping out businesses and directing investment towards them. This idea isn’t mine originally.

    Reduce the OCR by 1% and apply a 1% tax to residential mortgages; both owner-occupied and investment.

    This way banks will be more encouraged to lend to businesses. The government will get more tax revenue. Residential investment won’t be as attractive: at the moment you can write off your interest costs against your income; this change will reduce the interest portion that can be written off but the cost will remain the same, with the difference going direct to the government. The OCR will be lower so foreign investors will gain less return on their deposits.

    This also has the advantage over capital gains tax in that the revenue streams are immediate, based on present capital value (via the mortgage) and there’s no distortion around ring-fencing in or out specific types of assets.

    • deano 2.1

      variable mortgage levy was supported by cullen in 2006 but the Nats and the Herald shourted it down.

      Better (because it applies to all consumers, not just those with mortgages – and it makes them save rather than taking their money and giving it to banks and savers) would be complusory Kiwisaver with a variable contrbiution rate

  3. captain hook 3

    granny has become senile just like armstrong and venal like sullivan and is turning into an alltogether nasty thing.

  4. BernyD 4

    If their workers were in a Union they’d be able to do something about it 🙂
    If the editorial policies make us sick, imagine actually working there …. ick

  5. BernyD 5

    Y’know I recall sometime in the 80’s when they were discussing a “Hypocratic” style oath for Reporters to live by, Ultimately the response was “Don’t put your evil censorship/contraints on us buddy”, but today I can see why the civilised people of the 80’s pushed for it.
    Holding a grade average of A++ in the mathematics of nuclear fission doesn’t make them good people nor does it inspire confidence.

  6. All the Herald says is –
    You cannot go back to Muldoonism, because that is what the proposal means.
    He stuffed the economy, by taking control of the Reserve Bank and manipulating it (very badly) – hence the 1986 Reserve Bank Act.
    Douglas had to sort it out.

    • BernyD 6.1

      If Muldoon was alive today he would most likely have sworn off politics.
      No one wanted him to regulate, so he stole our pensions instead, bad for his heart, but necessary.

  7. captain hook 7

    bullshit.
    when douglas realised that the Labour Party would never make him him PM he decided to do as much damage to the country and the party that he could because when it came down to it he was personally financially secure.
    He swallowed the 80’s reagan ideology whole and thought he could make up rules that would last forever.
    not so.
    the essence of being a human being is the ability to adapt to the environment and at the moment New Zealand is not adapting at all. and in fact is compounding error upon error by trying to rely on someone elses rules instead of generating new alternatives.

  8. millsy 8

    The Reserve Bank 1989 has succeeded at elimintating double digit inflation but at huge social costs.

    The reduction and slow growth in wages and conditions (esp during the so-called ‘boom’ years — that is what happens when you loosen credit — people burrow to the hilt to buy houses and imported goods), the consistent erosion of social spending starting from Ruth’s cuts back in 1991 and the consequent reduction in edcuation and health services (ie hospital closure) and reductions and pay and conditions for education in health staff.

    Thanks to the RBA, the entire post war 1935-84 welfare state has been dismantled so the rich can enjoy lower mortgages and tax cuts.

  9. mike e 9

    Fortran if we keep importing fuel in the amounts we are ,we are going broke sooner or later we will pay the price!

Recent Comments

Recent Posts

  • Brexit vote costs NZ effective EU voice
    Despite being extremely close the result of the referendum in Britain reflects the majority voice, Labour’s Foreign Affairs spokesperson David Shearer says. “While we respect the decision to leave the EU, it goes without saying the move will usher in ...
    1 day ago
  • Pasifika Education Centre doomed
    The Pasifika Education Centre appears doomed to close down this December, says Labour’s Pacific Island Affairs spokesperson Su’a William Sio  “In a written question I asked the Minister whether he would put a bid in for more money. His answer ...
    1 day ago
  • Onetai Station review a shameful whitewash
    A report released today on the Overseas Investment Office’s (OIO) good character test is a whitewash that does nothing to improve New Zealand’s overseas investment regime, says Labour’s Land Information spokesperson David Cunliffe. “The review of the good character test ...
    1 day ago
  • We need a national strategy to end homelessness now
    Long before I entered Parliament, housing and homelessness were issues dear to my heart. I know from personal experience just how hard it is to find an affordable home in Auckland. In my maiden speech, I talked about how when ...
    GreensBy Marama Davidson
    2 days ago
  • Capital feels a chill economic wind
      Wellington is on the cusp of recession with a sharp fall in economic confidence in the latest Westpac McDermott Miller confidence survey, says Labour’s Regional Development spokesperson David Clark.  “Economic confidence amongst Wellingtonians has dropped 12% in the past ...
    2 days ago
  • Dive school rort took six years to dredge up
    News that yet another private training establishment (PTE) has rorted the Government’s tertiary funding system since 2009 shows that Steven Joyce has no control of the sector, says Labour’s Associate Education (Tertiary) spokesperson David Cunliffe. “Like Agribusiness Training and Taratahi, ...
    2 days ago
  • National’s housing crisis hitting renters hard
    National’s ongoing housing crisis is causing massive rental increases, with Auckland renters being hit the hardest, says Labour’s Housing spokesperson Phil Twyford. ...
    2 days ago
  • A Day with the PSA
    This week, along with Labour MP Kris Faafoi, I accepted an invitation to spend a day working alongside the good folk at the Public Service Association in Wellington. As the Workplace Relations and Safety spokesperson for the Greens, I was ...
    GreensBy Denise Roche
    3 days ago
  • A Day with the PSA
    This week, along with Labour MP Kris Faafoi, I accepted an invitation to spend a day working alongside the good folk at the Public Service Association in Wellington. As the Workplace Relations and Safety spokesperson for the Greens, I was ...
    GreensBy Denise Roche
    3 days ago
  • Government holds Northland back
    New information shows Northland remains the most economically depressed region in New Zealand, says Labour’s Regional Development spokesperson David Clark. “The latest Westpac McDermott Miller regional survey found that more Northlanders believe their local economy will deteriorate this year than ...
    3 days ago
  • Rebstock report into MFAT leaks a disgrace
    An Ombudsman’s report on the Paul Rebstock investigation into MFAT leaks shows the two diplomats at the centre of the case were treated disgracefully, says Labour’s State Services spokesperson Kris Faafoi.  “The Ombudsman says one of the diplomats Derek Leask ...
    3 days ago
  • More families forced to turn to food banks for meals
    Increasing numbers of families are having to go to food banks just to put a meal on the table, according to a new report that should shame the Government into action, says Labour’s Social Development spokesperson Carmel Sepuloni. ...
    3 days ago
  • We have a housing emergency in New Zealand
    Auckland, New Zealand, where house prices have risen 20 percent in the last year alone We have a housing emergency in New Zealand.  Like many people we are ashamed and angry that in a wealthy country like ours, we have ...
    GreensBy Eugenie Sage
    3 days ago
  • We have a housing emergency in New Zealand
    Auckland, New Zealand, where house prices have risen 20 percent in the last year alone We have a housing emergency in New Zealand.  Like many people we are ashamed and angry that in a wealthy country like ours, we have ...
    GreensBy Eugenie Sage
    3 days ago
  • Aussie reforms signal trouble ahead for school funding plan
    Plans by the Government to return to bulk funding are likely to see increased class sizes and schools most in need missing out on much-needed resources, Labour’s Acting Education spokesperson Grant Robertson says. “The signaled return to bulk funding is ...
    3 days ago
  • Toxic Sites – the down low on the go slow
    In  2011, I negotiated an agreement with the National Government to advance work on cleaning up contaminated sites across the country. This included establishing a National Register of the ten worst sites where the creators of the problem could not ...
    GreensBy Catherine Delahunty
    4 days ago
  • Aucklanders face new motorway tax of up to $2500 a year
    The Government wants to tax Aucklanders thousands of dollars a year just to use the motorway network, says Labour’s Auckland Issues spokesperson Phil Twyford. “Officials estimate the average city commute is 11.8km. This means for the average Aucklander commuting five ...
    4 days ago
  • 15 corrupt bank managers identified in student fraud
    New information show 15 bank managers in India have been identified by Immigration New Zealand as presenting fraudulent documents on behalf of foreign students studying here, Labour’s Immigration spokesperson Iain Lees-Galloway says. “Documents obtained by Labour under the Official Information ...
    4 days ago
  • National leaves Kiwi savers the most vulnerable in OECD
    News last week that Israel’s Finance Minister will insure savers’ bank deposits means New Zealand will be left as the only country in the OECD that has no deposit insurance to protect savers’ funds should a bank fail. Most Kiwis ...
    GreensBy James Shaw
    5 days ago
  • Comprehensive plan for future of work needed
    A Massey University study showing many New Zealanders are unaware of the increasing role of automation in their workplace, highlights the need for a comprehensive plan for the future of work, says Grant Robertson, Chair of Labour’s Future of Work ...
    5 days ago
  • Another National Government failure: 90 day work trials
    On Friday last week, the Treasury released a report by MOTU economic consultants into the effectiveness of the controversial 90-day work trial legislation. The report found that there was “no evidence that the policy affected the number of hires by ...
    GreensBy Denise Roche
    5 days ago
  • Iraq mission extension case not made
    The Prime Minister has not made the case for extending the Iraq deployment another 18 months nor the expansion of their mission, says Opposition Leader Andrew Little.  “Labour originally opposed the deployment because the Iraqi Army’s track record was poor, ...
    5 days ago
  • Denial is a long river
    William Rolleston from Federated Farmers made the absurd claim on RNZ on Saturday that “we actually have very clean rivers”. This statement doesn’t represent the many farmers who know water quality is in big trouble and are working to clean ...
    GreensBy Catherine Delahunty
    5 days ago
  • Denial is a long river
    William Rolleston from Federated Farmers made the absurd claim on RNZ on Saturday that “we actually have very clean rivers”. This statement doesn’t represent the many farmers who know water quality is in big trouble and are working to clean ...
    GreensBy Catherine Delahunty
    5 days ago
  • Melanoma deaths could be avoided by an early access scheme
      The tragic death of Dunedin’s Graeme Dore from advanced Melanoma underlines the cruelty of this Government in promising a treatment but delaying for months, says Labour’s Health Spokesperson Annette King.  “Graeme was diagnosed with Melanoma last year. He used ...
    5 days ago
  • Assessing the Defence White Paper
    The Government’s recently released Defence White Paper has raised questions again about New Zealand’s defence priorities, and in particular the level and nature of public funding on defensive capabilities. The Green Party has a longstanding belief that priority must be ...
    GreensBy Kennedy Graham
    6 days ago
  • Kiwis’ confidence drops again: Economy needs a boost
    Westpac’s consumer confidence survey has fallen for the seventh time in nine quarters, with middle income households ‘increasingly worried about where the economy is heading over the next few years’, says Labour’s Finance spokesperson Grant Robertson. “This survey is a ...
    6 days ago
  • Relocation grant simply kicks can down the road
    The response by state house tenants and social agencies to the Government’s rushed plan to shift families out of Auckland tells us what we already knew – this is no answer to the chronic housing shortage, Opposition Leader Andrew Little ...
    6 days ago
  • Peace hīkoi to Parihaka
    On Friday a Green crew walked with the peace hīkoi from Ōkato to Parihaka. Some of us were from Parliament and some were party members from Taranaki and further afield. It was a cloudy but gentle day and at one ...
    GreensBy Catherine Delahunty
    6 days ago
  • Children’s Commissioner right to worry about CYF transition
    The Government must listen to the Children’s Commissioner’s concerns that young people under CYF care could be ‘negatively impacted’ as the new agency’s reforms become reality, says Labour’s Children’s spokesperson Jacinda Ardern. “Dr Russell Wills has used the second annual ...
    6 days ago
  • Bill English exaggerates PPL costs to justify veto
    The Finance Minister has used trumped-up costings to justify a financial veto against parents having 26 weeks paid parental leave, says Labour MP Sue Moroney. “Bill English’s assertion on RNZ yesterday that the measure would cost an extra $280 million ...
    1 week ago
  • Government must refund overcharged motorists
    Labour is calling on the Government to refund motor registration fees to three-quarters of a million Kiwi motorists whose vehicles were wrongly classified under National’s shambolic ACC motor vehicle risk rating system, Labour’s ACC spokesperson Sue Moroney says.“Minister Kaye’s ridiculous ...
    1 week ago
  • 90-day work trials an unfair failure which must change
    A new Treasury report shows the Government’s 90-day trials haven’t helped businesses and are inherently unfair, Labour’s Workplace Relations spokesperson Iain Lees-Galloway says. “The Motu report found that 90-day trial periods had no impact on overall employment and did not ...
    1 week ago
  • Massey East houses a start but Nick Smith should think bigger
    The Massey East 196-home development is a start but the Government must think bigger if it is to end the housing crisis, Labour’s Housing spokesperson Phil Twyford says. “It is great the Government is finally realising it needs to build ...
    1 week ago
  • More changes needed to ensure fewer cases like Teina Pora’s
    Teina Pora spent 21 years behind bars for a crime he didn’t commit, shafted by a Police investigation that prioritised an investigator’s hunch over the pursuit of credible evidence. Yesterday’s announcement that the government is to pay him $2.5m in ...
    GreensBy David Clendon
    1 week ago
  • New Zealand Labour sends condolences to UK
    The New Zealand Labour Party is sickened and saddened by the murder of British Labour MP Jo Cox, Labour Leader Andrew Little says. “Ms Cox was killed in cold blood while simply doing her job as a constituent MP. She ...
    1 week ago
  • Shameful refugee quota increase still leaves NZ at the bottom of the list
    Minister for Immigration Michael Woodhouse announced this week that the government will put off increasing the refugee quota by 1000 places until 2018.  It’s a shameful decision that undermines the Government’s claim that it takes its international humanitarian obligations seriously, ...
    GreensBy Denise Roche
    1 week ago
  • Paula Bennett as a victim hard to swallow
    The National Party spin machine has gone into overdrive to try and present Paula Bennett as the victim in the Te Puea Marae smear saga, says Labour Housing spokesperson Phil Twyford. “Bill English in Parliament today tried valiantly to paint ...
    1 week ago
  • Voters to have the final veto on paid parental leave
    New Zealanders will have the final right of veto on a Government that has ignored democracy and is out of touch with the pressures and demands on families, says Labour MP Sue Moroney. “Today’s decision by National to veto 26 ...
    1 week ago
  • Collins should put Kiwis’ money where her mouth is
    Labour’s Police spokesman Stuart Nash is calling on anyone who has received a speeding ticket for going up to 5km/h over the 100km/hr open road speed limit to write to him and he will take it up on their behalf ...
    1 week ago
  • Where is the leadership on equal pay for work of equal value?
    The gender pay gap in the public service is worse than in the private sector. I’ve always found this particularly galling because I expect our Government to provide an example to the private sector on things like human rights, rather ...
    GreensBy Jan Logie
    1 week ago
  • Kiwis’ real disposable income goes nowhere for the year
    New Zealanders’ hard work for the last year resulted in no increase in real disposable income, showing Kiwis aren’t getting ahead under National, says Labour’s Finance spokesperson Grant Robertson. “Today’s GDP figures reveal that real gross national disposable income per ...
    1 week ago
  • Pora case a case to learn from
    Conformation that Teina Pora will receive $2.5million from the Crown for more than 20 years of wrongful imprisonment does not fix the flaws in our system that led to this miscarriage of justice, Labour’s Justice spokesperson Jacinda Ardern says. “The ...
    1 week ago
  • Government needs to start again with RMA changes
    The National Government’s proposed changes to the Resource Management Act have attracted more than 800 submissions, many of them critical of key aspects of the Resource Legislation Bill. There has been much criticism of the new regulation making powers given ...
    GreensBy Eugenie Sage
    1 week ago
  • Bennett’s briefing completely unacceptable
    It is completely unacceptable that Paula Bennett briefed her political staff on the police investigation into Hurimoana Dennis after her meeting with him, despite it having nothing to do with her social housing portfolio, says Labour’s Housing spokesperson Phil Twyford. ...
    1 week ago
  • Speech to Green Building Council
    Building smarter, greener cities It will be clear to anyone who has been watching the public debate on the housing crisis that housing in New Zealand is sadly far from being economically sustainable when Auckland has the fourth most unaffordable ...
    2 weeks ago
  • Paula Bennett has more questions to answer
    It is unthinkable that Paula Bennett’s press secretary went rogue and tried to smear the reputation of someone involved in helping the homeless, Labour’s Housing spokesperson Phil Twyford says. “Political staff would not take such serious unilateral action without the ...
    2 weeks ago
  • Speech on Notice of Motion on Orlando
    Mr Speaker, The Labour Party joins with the government in expressing our horror at this atrocity and our love and sympathy are with the victims and their families. Our thoughts are with the people of Orlando and of the United ...
    2 weeks ago
  • Tiakina Ngā Wai – Swimmable Rivers Report June 2016
    The campaign to clean up our rivers was launched at the Green Conference at Queens Birthday weekend. However, the work prior to the launch goes back a number of years. Russel Norman and Eugenie Sage deserve full credit for the ...
    GreensBy Catherine Delahunty
    2 weeks ago
  • We can do more: Refugee quota should be doubled
    New Zealand is a better country than National’s miserable increase in the refugee quota that ignores our obligations to the international community and people in need, says Opposition Leader Andrew Little. “It is a sad day when the Government can’t ...
    2 weeks ago

Public service advertisements by The Standard

Current CO2 level in the atmosphere