Reserve Bank admits problem, sits on hands

Written By: - Date published: 1:27 pm, January 31st, 2013 - 14 comments
Categories: Economy, exports, monetary policy - Tags:

Today’s announcement from the Reserve Bank states that inflation is still below its target band of 1-3%. It says:

“Inflation remains subdued and is currently just below the bottom of the Reserve Bank’s inflation target range. This mainly reflects the impact of the overvalued New Zealand dollar. The high currency is directly supressing inflation on traded goods, and is undermining profitability in export and import competing industries. At the same time, the labour market remains weak and fiscal consolidation is dampening growth.

The high and overvalued dollar keeps import prices down so consumers benefit, but kills exporters who must provide for our economy’s future.  That is the main point being made to the Manufacturing Inquiry set up by Labour, Greens and New Zealand First after the Government blocked a select committee enquiry into the sector. The Reserve Bank’s obsession with the very different problems of the 1980’s means that as a country we are eating our seed corn.

The other people who benefit are currency speculators and money market dealers, which explains why so much media comment comes from that sector. The unchanged 2.5% interest rate may be a record low for New Zealand, but it is still well above the 0.0-0.5% in the major financial markets. While the New Zealand dollar stays  high, it is a guaranteed one-way bet for the speculators. The Reserve Bank’s announcement pushed the dollar up half a cent against the US dollar.

But the Reserve Bank doesn’t want to debate the issue with anyone who considers it should run a more balanced monetary policy, as other countries do. We are told the  Governor will address the Canterbury Employers and Chamber of Commerce on growth, followed later by Business NZ. These organisations are the result of merging the old Employers Association and the former Chambers of Commerce, and now mainly represent now domestic business. Expect the same old same old “nothing we can do.”

For a real debate the Reserve Bank Governor should front up to the Manufacturers and Employers Association, who represent mainly exporting manufacturers.

14 comments on “Reserve Bank admits problem, sits on hands ”

  1. Lightly 1

    good post but Yyou keep on leaving Mana out of the list on the manufacturing inquiry. And you keep writing Labour first like it was their idea, when it was Russel Norman’s.

    • handle 1.1

      Labour being able to form a viable coalition depends on more grown-up behaviour than this.

    • Tim 1.2

      Yep …. and there’s my current problem with Labour as it stands ‘a.t.m’. Not JUST their inability to disavow themselves of failed neo-liberal ideology, but its attitude. I concede that for a lot of people, the sins you accuse Mike Smith of (above) may seem like nitpicking, but it goes to their attitude and sense of entitlement – often since they’ve decided to make a career out of politics (and I distinguish THAT from political representation of an electorate, and all electorates).
      I’m all for supporting Labour, and as I’ve said before – one of the best things to do for those that don’t like what’s going on with Labour is to become members – it doesn’t commit you to actually VOTING LAbour next time – and nor does it commit you to NOT making donations to parties such as the Greens. One of the best protests would be for Labour to have a HUGE membership but to find that members didn’t actually vote for them come election time
      I’ve been chastised before for commenting on threads from Mike Smith, however there is a ‘theme’ at play here, and its a theme that a lot of people (including myself) are pissed off with ESPECIALLY having supported them through thick and thin over a lifetime.
      Maybe one day they’ll get it. Right now they don’t (and I’m surprised some don’t – such as Robertson).
      Still, I understand how that sense of entitlement comes about. It’s hard to have to admit you’ve become completely out of touch with those that once fawned all over you.
      Good thing is, Key will soon be experiencing such a phenomenon and the outcome won’t be very pretty.

  2. NoseViper (The Nose knows) 2

    Imported goods being low priced because of a high valued currency must seem a good idea for politicians to keep the masses happy and in debt at the same time. Thus giving them an incentive to work the long hours that we have ended up with here.

    But that idea is worn out. People have been shocked into cutting debt and spending is down. The idea of a consumer fuelled economy is a disaster anyway – an indication that there is little else going on in a very flabby economy.

    And as I drag advertising from my mailbox (must get a no advert sign), much of it is flashing that it’s no deposit, don’t pay till 2014 stuff. So the Australian banks lend us money to buy whiteware and technology from Oz stores. And we let ourselves be sucked dry. Meanwhile the Aussies are laughing all the way to the bank, in fact several banks.

    Import licences based on export receipts? How about it??

  3. Lanthanide 3

    I’d like to see:

    1. LVR cap of 85% for mortgages. Could eventually lower it to 80%.
    2. Reserve bank drop the OCR by 1%, offset by the government imposing a new 1% mortgage tax, so mortgage rates would stay at the current levels, but instead of only paying interest to the banks, now the government would get a cut. Make people who own capital on tick contribute to the running of the country.

    • tsmithfield 3.1

      Some good thoughts Lanth. However, there is always the problem of unintended consequences. Firstly many small business owners often use their houses as a source of capital to fund their business. So, restricting bank lending ratios could affect employment.

      Secondly, a lot of bank funding doesn’t come from the RB, but rather from overseas. So, imposing a mortgage tax might indeed increase rates.

      • Lanthanide 3.1.1

        They use their houses as a source of capital because the banks make it so bloody difficult to get business loans. So how about fixing that problem. Adding the 1% residential mortgage tax would help because with a lower OCR, interest rates for other forms of lending could drop. Similarly the LVR would stop the gravy-train for banks and they’d have to expand their other forms of lending to increase their profits.

        “Secondly, a lot of bank funding doesn’t come from the RB, but rather from overseas. So, imposing a mortgage tax might indeed increase rates.”

        How? The OCR would be dropped in return.

        • CV - Real Labour 3.1.1.1

          Also, KiwiBank could be permitted to start playing hardball in the mortgage market place.

      • Draco T Bastard 3.1.2

        Secondly, a lot of bank funding doesn’t come from the RB, but rather from overseas.

        And that would be why bank notes, as opposed to reserve currency, makes up ~95% of money.

        http://en.wikipedia.org/wiki/Fractional_reserve_banking

  4. NoseViper (The Nose knows) 4

    Sounds doable. Won’t get though. Pollies are sooo happy riding round in the BMW keeping the lid on everything in the country – it would be a shame to make waves by making changes, and they would have to explain them to their narrow-focussed (me, me) supporters.

  5. Tiresias 5

    But… but… but… How can the dollar be overvalued? Doesn’t the invisible hand know what it’s doing?

  6. Whistler 6

    Am sick of the ‘overvalued dollar myth’ . It is what it is. Compared to OZ and the US it’s not that high anyhow. Every country’s exports are someone else’s imports. Our exporters want our dollar lower so as to subsidise their commodities. Its effectively stealing from us to feather their nests.

    The same game is played in every exporting country.

    The real answer is to expose the other great myth that exporting is the only way to grow and to aim instead and move towards greater self sufficiency.

    • Draco T Bastard 6.1

      Bingo.

      But we won’t get that as building only to provide for the local market means that the local capitalists won’t have enough income to pay the interest that the banks are charging as well as make a profit.

  7. Fortran 7

    I would accept thet the Reserve Bank start by making the minimum LVR at 75% or 80% as above already stated.
    My first Bank Mortgage was max $15,000 at 6.5%, and second from a finance house at 16%, irrespective of valuation.

Recent Comments

Recent Posts

  • Anzac Commemorative Address – NZ National Service, Chunuk Bair
    Distinguished guests -   It is an honour to return once again to this site which, as the resting place for so many of our war-dead, has become a sacred place for generations of New Zealanders.   Our presence here and at the other special spaces of Gallipoli is made ...
    BeehiveBy beehive.govt.nz
    7 hours ago
  • Anzac Commemorative Address – Dawn Service, Gallipoli, Türkiye
    Mai ia tawhiti pamamao, te moana nui a Kiwa, kua tae whakaiti mai matou, ki to koutou papa whenua. No koutou te tapuwae, no matou te tapuwae, kua honoa pumautia.   Ko nga toa kua hinga nei, o te Waipounamu, o te Ika a Maui, he okioki tahi me o ...
    BeehiveBy beehive.govt.nz
    13 hours ago
  • PM announces changes to portfolios
    Paul Goldsmith will take on responsibility for the Media and Communications portfolio, while Louise Upston will pick up the Disability Issues portfolio, Prime Minister Christopher Luxon announced today. “Our Government is relentlessly focused on getting New Zealand back on track. As issues change in prominence, I plan to adjust Ministerial ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • New catch limits for unique fishery areas
    Recreational catch limits will be reduced in areas of Fiordland and the Chatham Islands to help keep those fisheries healthy and sustainable, Oceans and Fisheries Minister Shane Jones says. The lower recreational daily catch limits for a range of finfish and shellfish species caught in the Fiordland Marine Area and ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Minister welcomes hydrogen milestone
    Energy Minister Simeon Brown has welcomed an important milestone in New Zealand’s hydrogen future, with the opening of the country’s first network of hydrogen refuelling stations in Wiri. “I want to congratulate the team at Hiringa Energy and its partners K one W one (K1W1), Mitsui & Co New Zealand ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Urgent changes to system through first RMA Amendment Bill
    The coalition Government is delivering on its commitment to improve resource management laws and give greater certainty to consent applicants, with a Bill to amend the Resource Management Act (RMA) expected to be introduced to Parliament next month. RMA Reform Minister Chris Bishop has today outlined the first RMA Amendment ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Overseas decommissioning models considered
    Overseas models for regulating the oil and gas sector, including their decommissioning regimes, are being carefully scrutinised as a potential template for New Zealand’s own sector, Resources Minister Shane Jones says. The Coalition Government is focused on rebuilding investor confidence in New Zealand’s energy sector as it looks to strengthen ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Release of North Island Severe Weather Event Inquiry
    Emergency Management and Recovery Minister Mark Mitchell has today released the Report of the Government Inquiry into the response to the North Island Severe Weather Events. “The report shows that New Zealand’s emergency management system is not fit-for-purpose and there are some significant gaps we need to address,” Mr Mitchell ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Justice Minister to attend Human Rights Council
    Justice Minister Paul Goldsmith is today travelling to Europe where he’ll update the United Nations Human Rights Council on the Government’s work to restore law and order.  “Attending the Universal Periodic Review in Geneva provides us with an opportunity to present New Zealand’s human rights progress, priorities, and challenges, while ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Patterson reopens world’s largest wool scouring facility
    Associate Agriculture Minister, Mark Patterson, formally reopened the world’s largest wool processing facility today in Awatoto, Napier, following a $50 million rebuild and refurbishment project. “The reopening of this facility will significantly lift the economic opportunities available to New Zealand’s wool sector, which already accounts for 20 per cent of ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Speech to the Southland Otago Regional Engineering Collective Summit, 18 April 2024
    Hon Andrew Bayly, Minister for Small Business and Manufacturing  At the Southland Otago Regional Engineering Collective (SOREC) Summit, 18 April, Dunedin    Ngā mihi nui, Ko Andrew Bayly aho, Ko Whanganui aho    Good Afternoon and thank you for inviting me to open your summit today.    I am delighted ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Government to introduce revised Three Strikes law
    The Government is delivering on its commitment to bring back the Three Strikes legislation, Associate Justice Minister Nicole McKee announced today. “Our Government is committed to restoring law and order and enforcing appropriate consequences on criminals. We are making it clear that repeat serious violent or sexual offending is not ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • New diplomatic appointments
    Foreign Minister Winston Peters has today announced four new diplomatic appointments for New Zealand’s overseas missions.   “Our diplomats have a vital role in maintaining and protecting New Zealand’s interests around the world,” Mr Peters says.    “I am pleased to announce the appointment of these senior diplomats from the ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Humanitarian support for Ethiopia and Somalia
    New Zealand is contributing NZ$7 million to support communities affected by severe food insecurity and other urgent humanitarian needs in Ethiopia and Somalia, Foreign Minister Rt Hon Winston Peters announced today.   “Over 21 million people are in need of humanitarian assistance across Ethiopia, with a further 6.9 million people ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Arts Minister congratulates Mataaho Collective
    Minister for Arts, Culture and Heritage Paul Goldsmith is congratulating Mataaho Collective for winning the Golden Lion for best participant in the main exhibition at the Venice Biennale. "Congratulations to the Mataaho Collective for winning one of the world's most prestigious art prizes at the Venice Biennale.  “It is good ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Supporting better financial outcomes for Kiwis
    The Government is reforming financial services to improve access to home loans and other lending, and strengthen customer protections, Commerce and Consumer Affairs Minister Andrew Bayly and Housing Minister Chris Bishop announced today. “Our coalition Government is committed to rebuilding the economy and making life simpler by cutting red tape. We are ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Trade relationship with China remains strong
    “China remains a strong commercial opportunity for Kiwi exporters as Chinese businesses and consumers continue to value our high-quality safe produce,” Trade and Agriculture Minister Todd McClay says.   Mr McClay has returned to New Zealand following visits to Beijing, Harbin and Shanghai where he met ministers, governors and mayors and engaged in trade and agricultural events with the New ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • PM’s South East Asia mission does the business
    Prime Minister Christopher Luxon has completed a successful trip to Singapore, Thailand and the Philippines, deepening relationships and capitalising on opportunities. Mr Luxon was accompanied by a business delegation and says the choice of countries represents the priority the New Zealand Government places on South East Asia, and our relationships in ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • $41m to support clean energy in South East Asia
    New Zealand is demonstrating its commitment to reducing global greenhouse emissions, and supporting clean energy transition in South East Asia, through a contribution of NZ$41 million (US$25 million) in climate finance to the Asian Development Bank (ADB)-led Energy Transition Mechanism (ETM). Prime Minister Christopher Luxon and Climate Change Minister Simon Watts announced ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Minister releases Fast-track stakeholder list
    The Government is today releasing a list of organisations who received letters about the Fast-track applications process, says RMA Reform Minister Chris Bishop. “Recently Ministers and agencies have received a series of OIA requests for a list of organisations to whom I wrote with information on applying to have a ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Judicial appointments announced
    Attorney-General Judith Collins today announced the appointment of Wellington Barrister David Jonathan Boldt as a Judge of the High Court, and the Honourable Justice Matthew Palmer as a Judge of the Court of Appeal. Justice Boldt graduated with an LLB from Victoria University of Wellington in 1990, and also holds ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Education Minister heads to major teaching summit in Singapore
    Education Minister Erica Stanford will lead the New Zealand delegation at the 2024 International Summit on the Teaching Profession (ISTP) held in Singapore. The delegation includes representatives from the Post Primary Teachers’ Association (PPTA) Te Wehengarua and the New Zealand Educational Institute (NZEI) Te Riu Roa.  The summit is co-hosted ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Value of stopbank project proven during cyclone
    A stopbank upgrade project in Tairawhiti partly funded by the Government has increased flood resilience for around 7000ha of residential and horticultural land so far, Regional Development Minister Shane Jones says. Mr Jones today attended a dawn service in Gisborne to mark the end of the first stage of the ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Anzac commemorations, Türkiye relationship focus of visit
    Foreign Affairs Minister Winston Peters will represent the Government at Anzac Day commemorations on the Gallipoli Peninsula next week and engage with senior representatives of the Turkish government in Istanbul.    “The Gallipoli campaign is a defining event in our history. It will be a privilege to share the occasion ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Minister to Europe for OECD meeting, Anzac Day
    Science, Innovation and Technology and Defence Minister Judith Collins will next week attend the OECD Science and Technology Ministerial conference in Paris and Anzac Day commemorations in Belgium. “Science, innovation and technology have a major role to play in rebuilding our economy and achieving better health, environmental and social outcomes ...
    BeehiveBy beehive.govt.nz
    7 days ago
  • Comprehensive Partnership the goal for NZ and the Philippines
    Prime Minister Christopher Luxon held a bilateral meeting today with the President of the Philippines, Ferdinand Marcos Jr.  The Prime Minister was accompanied by MP Paulo Garcia, the first Filipino to be elected to a legislature outside the Philippines. During today’s meeting, Prime Minister Luxon and President Marcos Jr discussed opportunities to ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Government commits $20m to Westport flood protection
    The Government has announced that $20 million in funding will be made available to Westport to fund much needed flood protection around the town. This measure will significantly improve the resilience of the community, says Local Government Minister Simeon Brown. “The Westport community has already been allocated almost $3 million ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Taupō takes pole position
    The Government is proud to support the first ever Repco Supercars Championship event in Taupō as up to 70,000 motorsport fans attend the Taupō International Motorsport Park this weekend, says Economic Development Minister Melissa Lee. “Anticipation for the ITM Taupō Super400 is huge, with tickets and accommodation selling out weeks ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Cost of living support for low-income homeowners
    Local Government Minister Simeon Brown has announced an increase to the Rates Rebate Scheme, putting money back into the pockets of low-income homeowners.  “The coalition Government is committed to bringing down the cost of living for New Zealanders. That includes targeted support for those Kiwis who are doing things tough, such ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Government backing mussel spat project
    The Coalition Government is investing in a project to boost survival rates of New Zealand mussels and grow the industry, Oceans and Fisheries Minister Shane Jones has announced. “This project seeks to increase the resilience of our mussels and significantly boost the sector’s productivity,” Mr Jones says. “The project - ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Government focused on getting people into work
    Benefit figures released today underscore the importance of the Government’s plan to rebuild the economy and have 50,000 fewer people on Jobseeker Support, Social Development and Employment Minister Louise Upston says. “Benefit numbers are still significantly higher than when National was last in government, when there was about 70,000 fewer ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Clean energy key driver to reducing emissions
    The Government’s commitment to doubling New Zealand’s renewable energy capacity is backed by new data showing that clean energy has helped the country reach its lowest annual gross emissions since 1999, Climate Change Minister Simon Watts says. New Zealand’s latest Greenhouse Gas Inventory (1990-2022) published today, shows gross emissions fell ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Earthquake-prone buildings review brought forward
    The Government is bringing the earthquake-prone building review forward, with work to start immediately, and extending the deadline for remediations by four years, Building and Construction Minister Chris Penk says. “Our Government is focused on rebuilding the economy. A key part of our plan is to cut red tape that ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Thailand and NZ to agree to Strategic Partnership
    Prime Minister Christopher Luxon and his Thai counterpart, Prime Minister Srettha Thavisin, have today agreed that New Zealand and the Kingdom of Thailand will upgrade the bilateral relationship to a Strategic Partnership by 2026. “New Zealand and Thailand have a lot to offer each other. We have a strong mutual desire to build ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Government consults on extending coastal permits for ports
    RMA Reform Minister Chris Bishop and Transport Minister Simeon Brown have today announced the Coalition Government’s intention to extend port coastal permits for a further 20 years, providing port operators with certainty to continue their operations. “The introduction of the Resource Management Act in 1991 required ports to obtain coastal ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Inflation coming down, but more work to do
    Today’s announcement that inflation is down to 4 per cent is encouraging news for Kiwis, but there is more work to be done - underlining the importance of the Government’s plan to get the economy back on track, acting Finance Minister Chris Bishop says. “Inflation is now at 4 per ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • School attendance restored as a priority in health advice
    Refreshed health guidance released today will help parents and schools make informed decisions about whether their child needs to be in school, addressing one of the key issues affecting school attendance, says Associate Education Minister David Seymour. In recent years, consistently across all school terms, short-term illness or medical reasons ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Unnecessary bureaucracy cut in oceans sector
    Oceans and Fisheries Minister Shane Jones is streamlining high-level oceans management while maintaining a focus on supporting the sector’s role in the export-led recovery of the economy. “I am working to realise the untapped potential of our fishing and aquaculture sector. To achieve that we need to be smarter with ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Patterson promoting NZ’s wool sector at International Congress
    Associate Agriculture Minister Mark Patterson is speaking at the International Wool Textile Organisation Congress in Adelaide, promoting New Zealand wool, and outlining the coalition Government’s support for the revitalisation the sector.    "New Zealand’s wool exports reached $400 million in the year to 30 June 2023, and the coalition Government ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Removing red tape to help early learners thrive
    The Government is making legislative changes to make it easier for new early learning services to be established, and for existing services to operate, Associate Education Minister David Seymour says. The changes involve repealing the network approval provisions that apply when someone wants to establish a new early learning service, ...
    BeehiveBy beehive.govt.nz
    1 week ago

Page generated in The Standard by Wordpress at 2024-04-25T15:29:04+00:00