“I’d really like to know what Treasury is on for it to be so bullish about the economy, as it must be
– Federated Farmers press release, 09, Sep. 2009
The day after Herald and TV headlined a Treasury report announcing a recovery, the right wing business pressure group Federated Farmers has released a press statement rubbishing these tales of a pending recovery.
Facing a massive drop in export receipts, due to the recession, the Feds are calling for a devaluation of the NZ dollar, in the hope of lifting flagging exports. As a by product this will raise internal prices, loading the cost of the recession onto those least able to afford it by fuelling massive internal price inflation.
Conversely artificially regulating the exchange rate could also begin a race to the bottom from our foreign competitors, (Australia is mentioned), and lead to the much feared international deflationary price spiral, which could cause protectionism and even trade wars to break out.
some other quotes from the Feds news release:
“While we have major reservations about inflation, Federated Farmers economists believe the supposed green shoots of recovery are weeds and not clover. New Zealand could easily dip back into a sharp recession unless there is a sustained export led recovery.”
“We believe it’s way too early to be calling this recession’s end. The expression ‘dead cat bounce’
comes to mind as this recession starts to resemble a ‘W’ shape rather than the ‘L’ we previously called.”
Like their rivals the Feds are hoping to flood a falling market with their products in an effort to drive their competitors out.
[I’m a bit more sympathetic to the exporters’ plight. Our dollar is getting too high but should we look at fixing and devaluing it? Could such a ‘beggar thy neighbour’ strategy spark trade wars as mentioned? – Marty][Bollard has chosen not to change the OCR]