Labour's Shearer on monetary policy

Currencies

Labour Party leader David Shearer discusses his party's stance on monetary policy with Alex Tarrant on TV3's The Nation

1st Oct 12, 9:05am by Alex Tarrant

Labour Party leader David Shearer discussed his party's stance on monetary policy with interest.co.nz's Alex Tarrant on TV3's The Nation programme over the weekend.

Watch the discussion in Part One of The Nation in the video above from 3:20.

Below is a transcript of the discussion:

Rachel The other big issue at the moment Mr Shearer is the high New Zealand dollar, and Labour has you know rested much of its economic policy on amending the Reserve Bank Act. How would that work under Labour?

David Well the way that the dollar has gone up, vis-à-vis other currencies has meant that many of our exporters are not doing well. We export to live, and if we export and our exports are doing well, then New Zealand does well. Right now the United States, the European Central Bank, Japan, South Korea, have all effectively devalued their currencies and ours are still very high. It makes it very difficult for our exporters to be able to compete in those sorts of bargains.

Alex Tarrant – Political Journalist

So they’ve all got very low interest rates obviously. So would Labour want to see the OCR lower, would Labour want to do what the United States and ECB is doing and intervene in the foreign exchange markets?

David Well what we've said is that the Reserve Bank Act needs to be amended so that inflation is not just simply the one target, so that we actually broaden that outlook, so it gives the Reserve Bank the ability to be able to take a look at how exports are doing and how our exchange rate is doing.

Alex So you cut the OCR to try and get the exchange rate down, it fuels inflation, what's the right level of those two? Who tells the Reserve Bank that?

David Well it's not for the politicians to run the exchange rate, but what you do need to have is a wider toolbox for the Reserve Bank to be able to make those sorts of judgements, and if they're only concentrating and focusing just on inflation, which was an issue, well it's still an issue – but it was certainly the big issue 15, 20, 25 years ago. But it's not so much the issue today. When you look around the world today how it is we're going to be able to compete, our exchange rate is killing us.

Alex Yeah but basically what Labour's effectively saying is you want them to cut interest rates so that the pressure comes off the funds coming into New Zealand, to try and get the exchange rate right. Isn't that the point of what Labour's saying with their policy?

David Well it may involve the interest rate coming down, but what we are saying is that rather than politicians becoming involved in setting exchange rates, what we are saying is that the Reserve Bank should have more ability rather than the very narrow….

Alex This is exactly what's happening though, Labour is saying we don’t want the exchange rate at where it is on the market level. It's there because of market dynamics at the moment. Labour's saying we don’t want it there for the market dynamics. That’s politicising the Reserve Bank Act again.

David No I don’t think that’s the case. What many people are saying, including the IMF are saying that our exchange rate is overvalued by the IMF at 15%. David Parker has been in the United States recently talking to Joseph Stiglitz, [and] the head of the IMF; A whole bunch of economists who are saying the era of focusing solely on inflation is now over, and we need to be looking at a wider range of economic measures and therefore giving the Reserve Bank the ability to actually take….

Alex They’ve got that ability now. It seems to me Labour just thinks oh just tell them to do it, I mean why doesn’t Labour ask them to do other things as well?

David No, I don’t agree. What we are saying to them under the Act now is that inflation is the primary target, and what we're saying is that needs to be broader.

Alex And now you don’t mind if inflation goes a bit higher if it allows for more employment or growth in the economy?

David No, what I'm saying is, is that inflation is one aspect, but it's not the sole aspect. It was the sole aspect 20 years ago, but today we've got other pressures on our economy, and that’s about exchange rates and actually growing our economy.

Rachel So is this Labour's magic bullet to stimulate the economy?

David No, there is not magic bullet, but this is one issue that we are exploring and putting out there because it is where other countries are going to and we are needing to take real notice of that. Now if you look at many other countries as I said, they are already doing that. This government is currently saying, no were just gonna leave it up to the world market, we're gonna be okay. Well actually that’s not the case.

But coming back to your point, what we need to be able to do, is not only just to focus on, just on exchange rates obviously, but it also is about making sure that we are investing in productive enterprises, and that is run a Capital Gains Tax that we've been talking about. Universal savings so that there's more capital to be able to be invested in businesses. There's a whole series, I mean Superannuation which we're worried about, growing so that it's starting to soak up government expenditure.

Alex That brings up a really important issue as to why the exchange rate is so high. Is because foreign funds have been flowing in to fuel the housing market. Labour says that’s because of a lack of a Capital Gains Tax. That’s got nothing to do with the Reserve Bank does it?

David No, this is what we're coming back to Rachel's point about a silver bullet, there are no silver bullets. There is no silver bullet but there are a series of measures that we can take to readjust our economy and refocus our economy towards productive enterprises rather than speculating ….

Alex And government can take the fiscal and tax settings not monetary policy really, it could be?

David Absolutely, it's not one or the other, it's both. I mean there's a whole bevvy of things that we're able to do. And what we're saying, and what we are very different from where National is going, is National is saying we can't do anything more it's hands off. What we're saying is no no it's not hands off, we can make some big changes, and this is the very big difference between us and National, some big changes around monetary policy, taxation, savings, superannuation.

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67 Comments

by Roelof | 1st Oct 12, 9:51am 1349038309

he..he..

"readjusting the signal"..... "we have run an economy before".... "universal savings"..... don't want a more regulated economy.

"some big changes around monetary policy, taxation, savings, superannuation."

If I have learnt one thing.... It is that Politicians are almost always wrong... When he says inflation is no longer an issue, because it hasn't been for the last 15-20 yrs..... then I reckon that inflation WILL become an issue.... and probably not long after they change monetary policy away from inflation targeting and broaden it to include things like employment and exchange rates...

I can see it now.... compulsory universal savings and zero interest rates....

Capital Gains tax..... and inflation running at 4-6%..

Low exchange rates...... and foreign direct investment buying up NZ.

Maybe I'm tooooo cynical

by Stephen Hulme | 1st Oct 12, 11:04am 1349042679

Maybe I'm tooooo cynical

Not at all - the calibre of the people determining the direction of the debate are inevitably inexperienced at timing/forecasting significant monetary pivot points.

One has to actually trade money extensively to know money and yet those doing so are remarkably absent from public debate- -maybe they are not so eloquent or easy on the eye?

But it's a problem that is increasingly in need of an answer before further ill-understood actions are implemented with the usual catastrophic results.

by ngakonui gold | 1st Oct 12, 10:29am 1349040587

maybe shearer should be going to hollywood because he's acting like he knows what he's talking about

by notaneconomist | 1st Oct 12, 10:48am 1349041691

If Labour wants to refocus the economy towards productive enterprise then maybe they should consider addressing the real problems that the productive sector has. On one hand Labour boasts that they always had a budget surplus (well when you can demand income via taxes at your will you can create any situtation you desire). However NZ's current account has had deficits for years and Labour did not address this on their 9 year shift.

Productive enterprise cannot keep funding Govt spending and dig us out of the debt hole at the same time. It is the inefficiencies within the Government and the size of Government that is directly attributing to NZ's problems. But it appears no Political party has the necessary will to make the appropriate changes.

The introduction of a CGT will only suck more money into the Govt coffers and productivity and the Current Account will be worse off and create the need for more overseas funds.

http://www.tradingeconomics.com/new-zealand/current-account

http://www.tradingeconomics.com/new-zealand/current-account-to-gdp

http://www.tradingeconomics.com/new-zealand/gdp

http://www.tradingeconomics.com/new-zealand/government-spending

http://www.tradingeconomics.com/new-zealand/gdp-per-capita

by scarfie | 1st Oct 12, 11:39am 1349044754

the inefficiencies within the Government and the size of Government that is directly attributing to NZ's problems.

I think other issues are the problem but sticking to your point the trouble is that the (im)balance has been built up over decades and these are all middle class jobs and salaries. The people involved are pretty much useless in terms of productivity and need to go through a period of retraining into more productive vocations. So large numbers of people with a substantial drop in income while they train is going to do wonderful things for our ponzi housing bubble isn't it? It simply can't be done without collapsing it and probably taking a few banks out with it. IMO it will mooch along until there is simply no one left willing to lend the money that keeps it going.

When they had the bank mergers going on in the mid 90's I was living in a small city. The redundancies that occurred resulted in basically a collapse of the local housing market as a dozen or so bank managers had to sell up and move to find work. We are talking 30% or more losses in value here.

by Gummy Bear Hero | 1st Oct 12, 12:58pm 1349049501

Perhaps NZ Labour will take a lesson from their brethren in France , and slug the top tax-payers 75 cents in the dollar ?

... forget cutting wastral policies like WFF and interest-free-student loans , rental supplements ...... or ring-fencing investment properties from personal income tax deductions ...

Nah , we'll just beat the crap out of the rich pricks .... everyone hates them anyway ....... not too many lost votes there .......

by scarfie | 1st Oct 12, 1:11pm 1349050281

I am absolutely in favour of reducing benefits, right across the board. First up in interest as that is a completely useless, unnecessary and immoral source of income. All unearned income should be targeted in fact, including tax.

by notaneconomist | 1st Oct 12, 5:42pm 1349066573

Scarfie - I think NZ is particularly well placed to make the moves in reducing Govt spending right now. I hear you on the re-education side - however Chch rebuild and Aucklands housing fiasco are two areas where employment opportunities are everywhere.

Stop bringing in foreign labour and get kiwi's working here. So many opportunities could be created right here and right now. It's not only the building rebuild, there's roading, sewerage lines, subdivisions and a plethora of employment which should be utilised in the transition phase of reducing Govt employee numbers.

There is not enough urgency within Govt to take the bulls by the horns and turn the economy back around. No one in business could operate with this kind of half arsed attitude. Gerry Brownlee looks completely inept at handling the earthquake and we can't afford this type of blundering.

The Chch earthquakes were a bloody tragedy - but they are also an enormous opportunity and the Govt has shown terrible leadership. Many of the employment opportunities would most likely come from apprenticeships etc that could have been started. You are still going to have a large number of clerical type positions become available which would suit some of the less hardy individuals. If some of these public servants had to take a wage cut in transferring they wont be able to borrow as much for housing so you can create a little swing to the downside at the same time which is all good.

by steven | 1st Oct 12, 6:24pm 1349069085

You know I think you are really clueless or so blinkered to the point of being blindfolded.

Austerity is highly counter-productive, it was shown to be in the 1930s and shown again and again in the GFC. How many examples of Govns cutting put in front of you does it take to show its disaster? infinite I'd guess.

So despite the "rational" market knowing best its the Govn's job to turn the economy around? Their only tool is some Govn spending to get business confidence back....but no you want to cut.

Some of the numbers from the GFC suggest for every $1 cut from Govn spending $1.60 is lost in private and Govn revenue that sort of throat cutting we dont need.

You dont turn economies around by providing manual poorly paid jobs, you turn it around by getting the better paid ones....that takes investment but you dont want Govn spending.

Apprentiships take Govn spending up front but more importantly time to train (3 years) and of course aptitude.

There is no opportunity in ChChs rebuild...not overall...some ppl like Fletchers and builders etc yeah they will be able to charge monopoly rents....thats damaging...

regards

by notaneconomist | 1st Oct 12, 9:41pm 1349080893

Steven -

My suggestion is a transfer from unecessary Govt employess to productive employees. They may not earn quite the same income as their Govt jobs but it would be a lot more than an unemployment benefit and the ability to reskill in an area where there is actual work. I shouldn't have to remind you that all employment is a supply and demand in the market.

It is absolute rubbish that the Governments only tool is Government spending to get business confidence back blah blah.

If the world can have too big to fail banks - well I would suggest that the same thing applies to Government.

If manual poor paid jobs (as you put it) won't turn the econony around then we could take alot of agriculture out of your equation and then see how good the economy goes. And I can tell you now it's the manual labour component who will be doing the rebuild not the keyboard tapping, coffee supping, full of self importance, sitting in the office, with the heater on people.

And as for Govt spending creating investment - bollocks. It's taxpayers money legally stolen that is being spent. The Government never earned the stuff in the first place. Next thing you'll be telling me that it's fine to go and steal choc bars from a shop and give them to one of your employees to sell or redistribute.

You turn the economy around with the resources and opportunities that you have immediately in front of you !!!!!

You also under-estimate the potential for new product invention that can occur from doing manual tasks within any industry.

by Nic the NZer | 1st Oct 12, 10:52pm 1349085151

The only reason you think government jobs are un-necessary is because you have some completely deluded view of how the economy works. This includes the completely invalid assumption that governments can't do anything of value or use because their pricing mechanism is not market based.

In fact nobody should be force to listen to this quazi-intellectual, bs, a-factual, a-historical, biggoted, deluded demagoguery.

by steven | 2nd Oct 12, 8:37am 1349120248

Correct.

Except she does have a right to voice an opinion.....just as we have the right to point out all the holes in it.

regards

by notaneconomist | 2nd Oct 12, 9:54am 1349124891

Nic the NZer - looking through a crystal ball and suggesting you know everything about what someone is thinking, their experience, skills etc, is dangerous territory. To write an abusive, bullying post without all the infomation or understanding is completely un-called for.

I suggest you look up inflation and the GDP deflator on trade economics. If you want NZ'ers to have a better quality of life you had better start to understand that inflation is currently working against working class people and the only thing that is sparing a lot of pain at the moment is the fact that interests rates are being held down.

You only have to view the household income to mortgage servicing costs to see how the low interest rates affected the percentage of earnings required to service the mortgage debt annually.

I certainly do not want to see NZ'ers suffer like they did in in the 1980's or the 1930's depression. I can't even count the number of people in my region who committed suicide, or who lost their business or house or went bankrupt during the 1980's. It was Government spending that caused the problems in the 1980's - think-big projects, subsidies etc that ran up Government debt and yet you tell me that I don't understand economics and accuse me of being a quazi-intellectual, bs, a-factual, a-historical, boggoted, deluded demoguery.

by scarfie | 2nd Oct 12, 10:06am 1349125607

"and the only thing that is sparing a lot of pain at the moment is the fact that interests rates are being held down."

It works in reverse, the pain is the reason interest rates are down :-(

by notaneconomist | 2nd Oct 12, 10:39am 1349127596

Scarfie - that's a bit pedantic. Yes there was pain but interest rates were brought down which spared/protected people from more/further pain. The pain was an effect not the cause. Were interest rates the cause - no. Has the reduction in interest costs had an effect - yes. Is the real cause still running around - yes. And would zero interest rates solve the cause - no.

by scarfie | 2nd Oct 12, 10:48am 1349128084

(M.V)+i=P.Q

Interest IS the cause. Until you get that then you won't get anything.

by Nic the NZer | 2nd Oct 12, 10:36am 1349127361

Wow, well I guess we can see why NZers are hated the world over, our government managed to cause huge market reversals in most western economies.

http://en.wikipedia.org/wiki/Black_Monday_(1987)

You are absolutely clueless, and it takes far less than a crystal ball to observe this fact.

The last thing anybody wants in the current economic climate is to be thrown out of their job, and to be forced to reskill. Especially so when it will worsen employment, demand and the job market as a direct result.

In fact this is one of the factors making the 1980s reforms so devistating. Even absolutely main stream sources point out the symptoms you described, and in fact the clear obvious cause, stuctural reform ostensibly the policy you are advocating.

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

Please do see immediate results, its describing the economic period you are describing exactly.

Causes were absolutely nothing to do with think-big projects, nothing to do with subsidies.

by notaneconomist | 2nd Oct 12, 11:34am 1349130844

Nic the NZer - OMG what planet are you on. Who the hell is throwing anyone out of a job???? This is about transferring people to where the work actually is and obtaining efficiencies in the market place. There is only one CONSTANT in life and that is CHANGE and yet people like you who don't realise that, want everything to stay the same and then justify your beliefs with emotional outbursts/accusations rather than intellect.

So what is your problem - having to meet the market and re-skill?? Well reality is that people and business have to re-skill and adapt everyday. When the re-skilling can be done mainly on the job it offers financially stability to those doing the re-skilling and the wider economy - this is a Win - Win.

So you would rather keep all the inefficiencies in the economy while importing further labour resources to cater for the demand !!!! Lose -Lose.

I suggest you go back further in your reading than the Rogernomics reforms that took place after the snap-election in 1984. NZ was not well placed financially when the sharemarket crashed in 1987. Many people felt wealthy but sorry to burst your bubble feeling wealthy and actually being wealthy are two completely different things. Real wealth is sustainable.

Don't bother pretending that you have NZ's best interests at heart, anyone who condones Current Government size and spending and the bureaucratic circus is part of the problem!! Learn to sort the Wheat from the Chaff.

by Nic the NZer | 2nd Oct 12, 12:21pm 1349133704

Last time I checked Earth was still classed as a planet, thanks for asking but my feet are well grounded in the real world.

The problem is that you are notaneconomist, so you don't realise that the market doesn't stabilize itself. Any economy which has ever existed, or ever will exist, does and must have some form of stabilisers built around it. In the absense of stabilizers, including regulation, welfare spending and progressive taxation, it tends to more exaggerated cycles of instability.

Inflicting experimental economic policy once is one thing, but after the experiment has failed it behests rational people not to be so stupid twice.

http://www.converge.org.nz/pma/apfail.htm

As for the case around Rogernomics, I think you were suppost to disagree about the clear negative effects of 3 years of Rogernomics.

by notaneconomist | 2nd Oct 12, 1:54pm 1349139290

Nic the NZer - your link is a very good account of the effects. However those effects were felt because of limited access to borrow in business, high interest rates, inflation and heavily controlled oversead markets.

When all the subsidies came off - farming had to change it's management structure from the skinny sheep regime of the 1970's which had allowed farmers to employee heaps of Labour.

NZ agriculture and other manufacturers were competing with their products in the international market place where subsidies, tarrifs and other trade barriers existed.

A country and it's people can only ever be as good as the Govt and it's bureaucrats hence my extreme dislike for the lot of them and their meddling. The sooner they cease to poke their noses into people's lives the better off we will all be.

I strongly disagree with your view on stability in fact what you portray as stabilising effects actually has a destabilising effect on every area of an economy and the people as markets cannot self-correct/adjust when they need to. The more meddling the more distortions.

by Nic the NZer | 2nd Oct 12, 8:30pm 1349163026

Sure, so as Steven is so keen to point out you are entitled to your a-factual, a-historical, biggoted, blinkered opinion. But you lose any debate, because it is simply your belief that this is the cause of Rogernomics downfall. You don't have a shred of evidence for what you are claiming, you are your own entire case.

In fact to point to 'limited access to borrow in business, high interest rates and inflation' as the stumbling blocks is simply to acknowledge that this policy failed in its objectives, because these are exactly the kinds of things which should have been theoretically improved by the policy, and you can't claim that 'heavily controlled overseas markets' are the stumbling block, because NZ can't do bugger all about this and this makes it a bad economic strategy to push this policy. As I said, a correct case is that this kind of structural reform is good for the economy, not that NZ should just implement it because you say so.

Since in the real world people are responsible for their actions and the forseeable consequences of their actions, when you say 'When all the subsidies came off', it is more correct to say, 'When Roger Douglas, and his cronies, stripped all the subsidies out of the NZ economy'. So I can see why you are saying, ohh all the government employees are just going to get a bit of a knudge, knudge, wink, wink and then they are going to find wonderful jobs elsewhere, but in fact, in reality what happens is the government throws them out of a job and tells them to go look for employment somewhere else. Thats the reality of what you are advocating and its the last thing any of them want, and its the last thing which is going to help them or the general economy. In fact if the economy worked to self correct in any real way, they would have quit their jobs already and would all be keenly participating in the re-build, unfortunately the market doesn't therefore they haven't. What could be stopping them I wonder? Let me guess, a bunch of bureaucrats actually have them tied into to their jobs, they want to leave and reskill, but sadly the just can't? What an absolute crock, your entire thesis is based on. Staring you in the face is the fact this is completely incorrect, though no doubt we will get to hear just how deluded your belief system is.

I am glad you strongly disagree about inherent economic stability, because you are absolutely 100% factually wrong, and economy with zero government in unstable and this fact is known to economic theory.

by notaneconomist | 4th Oct 12, 11:19am 1349302785

Nic the NZer - what a rant ! I don't think you read or understood what I have written in previous posts. Try reading some philosphy, psychology, history, political science, economic systems etc it might improve your skills in being objective rather than subjective.

You state "an economy with zero Government is unstable and this fact is known to economic theory" - Please provide facts to back up your statement !!! Where and When has this theory ever been tested?

It is actually impossible to have "an economy with zero Government" as "People's Rights" of some description will always have some form of legislative protection.

"Theory is when you know everything - But nothing works.

Practice is when everything works - But know one knows why.

In our economic Lab of NZ theory and practice are combined - Nothing works and nobody knows why".

by steven | 2nd Oct 12, 11:43am 1349131427

You throw your thoughts onto "paper" we can see them.

Uncalled for is declaring that the Libertarian way is how we should all do it because you think as 0.0001% of the population "think" its best for the rest of us....uh no thanks.

There is minimal inflation right now, what you are chosing to ignore is the effects of the inputs into food like fossil fuels...this is critical and fundimental. We have huge problems mostly that come about because so many freedoms to re-produce for instance have been undertaken without thought of impact or being responsible.

Housing is a ponzi scheme bubble, so ppl are paying twice what they need to, that will pop...so you cant use it for any policy justification.

The 1930s depression is exactly what you will see, that is the symptom and end result of a 30 to 40 year Ann Rand piece of buggery. Sure Muldoon caused a mess, sure he was mostly wrong...no better than any other Pollie. This however is different to Govn...its politics...

Yes we do acuse you of all that because that is exactly (including a greater depression) is what you aim to promote with your "solutions".

regards

by notaneconomist | 2nd Oct 12, 1:05pm 1349136336

Steven - un-called for has nothing to do with the Libertarian way that you keep referring to.

I have a preference to debating issues without personally abusing a person it keeps emotions out of the equation. Now I'll be clear here - I did say preference !

I don't even consider myself as a true Libertarian. I am a fierce believer in independence for all and that is something that is lacking. However I would balance this with some Government Social spending in essential areas only. The trouble now is that all Government spending has been deemed as essential and this has allowed people to abnegate responsibiity for themselves and when so many people become dependent on State the country suffers in all areas. You can't learn to dig yourself out of mess if you have the Govt ambulance at the top of every cliff.

by Nic the NZer | 2nd Oct 12, 11:31pm 1349173896

How about taking some personal responsibility for your ideas, they are ignorant and wrong and only function in the absense of reality. The reason so much government social spending has been 'deemed essential' is because restructuring it at present will not solve any of the problems caused by the market, particularly the housing market, and the obvious resulting boom and bust trend.

You are correct to point out its ill when so many people are dependant on the state, e.g unemployed, this is hardly helped by throwing people out of legitimate government employment, in fact that policy is clearly going to make it worse.

Clearly your ambulance/cliff analogy is bewildering, but if you want an analogy involving an ambulance and a cliff, try putting a fence at the top of a cliff, and the ambulance at the bottom. I think we should also point out, ambulances clean up the mess as best they can, this doesn't imply anything about the cause of the mess. Even your average child can understand this. So your attempted analogy is miss leading, incorrect and irrelevant.

by steven | 2nd Oct 12, 8:49am 1349120956

Unlikely there are many un-necessary Govn jobs, not a significant number anyway. Certainly from what I have been reading there has been dead wood cutting. Now sure I can accept there is a bit left, there always is, but as with pruning anything you can end up cutting out too much good to get the bad or even leave the plant vunerable to desease.

So you do whats known as compromise...something fanatics and extremists such as yourself cannot comprehend.

Tax isnt stealing....there you go proving you are another blinkered libertarian.......so you cant even get 1 MP let alone a Govn and here you go determined to force your clap trap proven to be a failure rubbish onto 99.999% of the rest. No difference between you and Mao really...

Restoring business confidence through austerity has been shown to be an abject failure in the UK for one......and you can throw the PIIGS in as further examples of how disasterious it is when up against the zero bound trap.

That leaves classic Keynesian response....which has a track record of working.

Never mind , meanwhile we'll head into a World wide Greater Depression as it seems enough right wing losers have enough of the reigns to ensure it.

That will cause more than a few deaths I think....

regards

by Anarkist | 2nd Oct 12, 9:57am 1349125041

"So many opportunities could be created right here and right now. It's not only the building rebuild, there's roading, sewerage lines, subdivisions and a plethora of employment which should be utilised in the transition phase of reducing Govt employee numbers."

I agree with your basic premise that manual labour has come to be massively undervalued in our society in favour of vocations with an emphasis on an academic background.

But the above point rather invalidates the general anti-government thesis because the historical record of the 19th Century and more contemporary experience in the Third World, conclusively demonstrates that the profit seeking private sector does a piss poor job of providing public infrastructure. Their time horizons are too short, because by their very nature profit maximising corporations have a very short term focus and public sector infrastructure investments generally require a very high initial capital investment with very long payback periods, which is why government funds them. The government has the luxary of having a long term focus because they're free of the need to maximise profits, which is why the structure of SOE's is so stupid. They should be focused on deliverying maximum good service, rather than divdends for their "shareholder".

by steven | 2nd Oct 12, 11:49am 1349131767

While I mostly agree, dont agree on the SOE being that stupid because we have seen how in-efficient and in-flexible totally state run services like the Post office/Telecom can be. So yes I can agree that providing a profit isnt great, however thats minor compared to the gains that seem to have occured with a bit of a more open market.

So the evidence from my perspecitive is the SOE's offer the best model yet, there may well be better, happy to be corrected if you can show that...

regards

by Anarkist | 2nd Oct 12, 3:10pm 1349143806

I don't really know much about how the State sector utilities performed prior to the Rogernomic reforms, being too young I have no first hand experience of that particular regime. Instead I have to rely on second or third hand accounts with all the hyperbole, exagerration, or nostalgia that entails.

From my perspective, I think that improved performance measurement methods and the fresh demand they be enforced in the state sector would arguably account for improvements in service provision, rather than the tenuous claim that actually neglible competition driven by the new profit maximising structure of SOE, is responsible. Not in our essentially captive market.

by Roelof | 1st Oct 12, 11:48am 1349045301

One of my Mates sells productivity software to small to med. size manufacturers.

Over the last 10 yrs he has seen many of these manufacturers close up shop in NZ.....

( these guys were not exporters...but just local manufacturers )

They have then GIVEN their Intellectual property ( sometimes 30 yrs worth of knowledge and innovation )..to China and have now simply become importers of the products they used to manufacture.

To me.... this starts getting to the crux of our problems:...( We have emraced Globalization without really thinking it thru.)

1/ It is simply not possible to compete with China.... it is not at all a level playing field.

2/ Economics places no value on the benefit of money flowing around and around in a local economy. ( ie. a local manufacturer who closes shop and becomes an importer is probably considered to be a neutral economic event )....

Do u think David Shearer or John Key would ever address this as an issue.??? .... they pay lip service to productivity and productive enterprise.

As NAeconomist says... it is a part of our problem that is our chronic current acct deficit.

by meh | 1st Oct 12, 11:39am 1349044787

What many people are saying, including the IMF are saying that our exchange rate is overvalued by the IMF at 15%. David Parker has been in the United States recently talking to Joseph Stiglitz, [and] the head of the IMF; A whole bunch of economists who are saying the era of focusing solely on inflation is now over, and we need to be looking at a wider range of economic measures

And therein lies the problem IMO. Relying on economists and flawed economic theory/science and a complete lack of common sense. No foresight and no vision of the bigger picture with the sole focus being on the financial aspect of everything. A financial/economic system that has distorted our view of the world around us and led to a complete disconnect with ourselves, the people around us and the one source that sustains us, the Earth.

A constant illusion that a "growing economy" will solve everything.

but today we've got other pressures on our economy, and that’s about exchange rates and actually growing our economy

by Nic the NZer | 1st Oct 12, 7:52pm 1349074373

Stiglitz doesn't believe a lot of what you are attributing to him. Maybe you should read through some of his books,

http://en.wikipedia.org/wiki/Joseph_Stiglitz#Books

He said a few years ago he was looking at alternative measure of economic productivity to GDP.

by midgetkiwi | 1st Oct 12, 1:29pm 1349051359

maybe a bit off tangent.. but regarding forsight and vision, what would happen theoretically if NZ, or any other country for that matter eg. switzerland, decided to return to a gold-backed currency? Would it be possible to "steal" reserve currency status from the US dollar, and thereby export currency as a means of income? or would it take a super power nation to do that? seems like there's a lot of opportunity for new powers rising, in a world where current super powers US, Eu, Japan, China, etc. are all in trouble. Or maybe I'm just talking crazy :)

by steven | 1st Oct 12, 3:17pm 1349057840

Go to gold, no we wouldnt become a reserve currency, just on that. If we found 1 trillion barrels of oil, yes without a doubt...

Going to gold is also a disaster economically and in terms of employment the only way left to de-value is with wage drops and (far) higher un-employment....economically its a disaster for ppl.

Yes all the super powers are in dire trouble, you are not talking crazy about that bit.

regards

by Mike B | 1st Oct 12, 1:53pm 1349052782

Hands up all those who learned a single thing from this crap?

Let us analise what david has told us

1 - David

Well the way that the dollar has gone up, vis-à-vis other currencies has meant that many of our exporters are not doing well. We export to live, and if we export and our exports are doing well, then New Zealand does well. Right now the United States, the European Central Bank, Japan, South Korea, have all effectively devalued their currencies and ours are still very high. It makes it very difficult for our exporters to be able to compete in those sorts of bargains.

WE LEARNED NOTHING

2 - David

Well what we've said is that the Reserve Bank Act needs to be amended so that inflation is not just simply the one target, so that we actually broaden that outlook, so it gives the Reserve Bank the ability to be able to take a look at how exports are doing and how our exchange rate is doing.

WHAT DOES THIS SAY? - "actually broaden that outlook" WAFFLE

3 - David

Well it's not for the politicians to run the exchange rate, but what you do need to have is a wider toolbox for the Reserve Bank to be able to make those sorts of judgements, and if they're only concentrating and focusing just on inflation, which was an issue, well it's still an issue – but it was certainly the big issue 15, 20, 25 years ago. But it's not so much the issue today. When you look around the world today how it is we're going to be able to compete, our exchange rate is killing us.

AND WHAT DID THIS TELL US? - "what you do need to have is a wider toolbox" - WAFFLE

4 - David

Well it may involve the interest rate coming down, but what we are saying is that rather than politicians becoming involved in setting exchange rates, what we are saying is that the Reserve Bank should have more ability rather than the very narrow….

AND WHAT DOES THIS TELL YOU - NOTHING "but what we are saying" - WAFFLE

5 - David

No I don’t think that’s the case. What many people are saying, including the IMF are saying that our exchange rate is overvalued by the IMF at 15%. David Parker has been in the United States recently talking to Joseph Stiglitz, [and] the head of the IMF; A whole bunch of economists who are saying the era of focusing solely on inflation is now over, and we need to be looking at a wider range of economic measures and therefore giving the Reserve Bank the ability to actually take….

AND WHAT DID THIS TELL US? - "No I don’t think" - HE DOSN'T THINK

6 - David

No, I don’t agree. What we are saying to them under the Act now is that inflation is the primary target, and what we're saying is that needs to be broader.

AND WHAT DID THIS TELL US? "what we're saying is that needs to be broader" - WAFFLE

7 - David

No, what I'm saying is, is that inflation is one aspect, but it's not the sole aspect. It was the sole aspect 20 years ago, but today we've got other pressures on our economy, and that’s about exchange rates and actually growing our economy.

AND WHAT DID THIS TELL US? NOTHING

8 - David

No, there is not magic bullet, but this is one issue that we are exploring and putting out there because it is where other countries are going to and we are needing to take real notice of that. Now if you look at many other countries as I said, they are already doing that. This government is currently saying, no were just gonna leave it up to the world market, we're gonna be okay. Well actually that’s not the case.

But coming back to your point, what we need to be able to do, is not only just to focus on, just on exchange rates obviously, but it also is about making sure that we are investing in productive enterprises, and that is run a Capital Gains Tax that we've been talking about. Universal savings so that there's more capital to be able to be invested in businesses. There's a whole series, I mean Superannuation which we're worried about, growing so that it's starting to soak up government expenditure.

AND WHAT DID THIS TELL US? "No, there is not magic bullet" IN OTHER WORDS "I DON"T KNOW HOW TO FIX IT, AS HE GOES ON TO SAY "this is one issue that we are exploring"

9 - David

No, this is what we're coming back to Rachel's point about a silver bullet, there are no silver bullets. There is no silver bullet but there are a series of measures that we can take to readjust our economy and refocus our economy towards productive enterprises rather than speculating ….

AND WHAT DID THIS TELL US? - ALL ABOUT SILVER BULLETS

10 - David

Absolutely, it's not one or the other, it's both. I mean there's a whole bevvy of things that we're able to do. And what we're saying, and what we are very different from where National is going, is National is saying we can't do anything more it's hands off. What we're saying is no no it's not hands off, we can make some big changes, and this is the very big difference between us and National, some big changes around monetary policy, taxation, savings, superannuation.

AND WHAT DID THIS TELL US? - "I mean there's a whole bevvy of things that we're able to do" - WAFFLE

How can anyone have learned anything from that?

And, when David, the UN Beaurocrat, gets the boot, what's their next leaders waffle going to be? Something different no doubt.

What is the Labour parties policy on the Reserve Bank? as the policy will be there after David has gone.

Rachel and Alex - What a lot of time wasting, have you nothing better to do with your time?

by Neven911 | 1st Oct 12, 4:18pm 1349061512

The sad thing is that we are left with the choice of National, self serving and venal versus Shearer a clueless bureaucrat, the tragedy being that I would choose self serving and venal over clueless anyday..at least you can predict and therefore plan for the outcome

by Alex Tarrant | 1st Oct 12, 5:05pm 1349064357

Hi Mike,

You might be rushing to conclusions there. I reckon we gave him ample space to be able to tell viewers about Labour's stance on monetary policy.

So you may have actually learnt a lot - that is, based on the fact you learnt nothing...

by Mike B | 1st Oct 12, 9:47pm 1349081277

Hi Alex,

Check out Bernards new venture at Journalism.org.nz then ask yourself this question

"If Alex had to pay for this article, would he?"

and i think that may explain something to you

by steven | 2nd Oct 12, 9:10pm 1349165404

yes, not nothing, I for one learned he's useless and full of waffle....oh god yet another one.

If nothing else I guess who to vote for becomes a Q of elimination of the worst first, he just confirmed Labour deserves to stay eliminated as voting option IMHO.

regards

by Spidy Sense | 1st Oct 12, 2:59pm 1349056747

The way I see it is the RBNZ and the RBA have made no adjustments to cater for massive changes in Monetary policy by developed economies.

What if instead of the usual monthly meetings and minute 25bps adjustments that they've been doing for years, they became more proactive and made bigger moves on needs basis?

What would fx traders think of a 200bps drop on Tuesday and a 215bps hike on Thursday?? It would certainly make me think twice going long NZD/JPY....

I'm not saying it needs to be a permanent change but surely keeping the market guessing could take some heat out of the NZD?

I could be barking up the wrong tree here but surely a bit of "no. 8 wired" thinking is better than the status quo and our economic (mis) fortunes held in the hands of old dinosaurs.

by Basel Brush III | 1st Oct 12, 3:49pm 1349059794

A comment I made two years ago suggested that Bollard was far too predictable

To screw the speculators the RB governor needs to :

1. Make moves on rates without a timetable

2. Move rates up and down without giving any reasons

3. Move in larger steps

The essential thing is not the amount of a move but the lack of predictability in both amount and timing.

by robby217 | 1st Oct 12, 6:01pm 1349067719

Or here is a novel idea, announce "we are withdrawing from the central banking market".

by iconoclast | 1st Oct 12, 3:18pm 1349057892

NO you are not barking up the wrong tree. That's exactly what could be done.

by Spidy Sense | 1st Oct 12, 3:55pm 1349060127

True dat bro....

Bollard and Stevens = Dinosaurs

Spidy Sense and Basel Brush III = Studs

P.S unless you can back up your 2 year claim on that thought process I'll have to claim it as my own.......

by iconoclast | 1st Oct 12, 4:16pm 1349061378

Here you go Spidyrperson .. 10 November 2010 .. discussed at length .. 23 months ago

Scarfie says Thanks for your contributions Iain, Boatman and Iconoclast.

http://www.interest.co.nz/opinion/51169/opinion-nz-risks-being-stomped-elephants-china-and-america-stumble-around-global-currency-markets

by Spidy Sense | 1st Oct 12, 4:46pm 1349063169

I humbly concede ownership for that piece of intellectual property to you sir......

I will say though...... great minds think alike. Unfortunately the idea reeks of common sense, so will be thoroughly discarded by both parties. I'd love to see the idea put to the master currency trade himself (Key) - Bernard?

by scarfie | 1st Oct 12, 6:30pm 1349069412

Hah I used to be so polite back then. Good on you for consistency on this point Iconoclast, and for the memory :-) Mine isn't so effective at this stuff as it works with images, but at least that is an advantage when you are pissed and trying to find your way home.

Interesting going back over those old posts and particularly Boatman's comments on the oil nations being the ones accumulating USD not China. Given that interest is forbidden in Islam and there has been the odd comment on the carry trade being the mechanism to circumvent this, then it would be fair to assume that Islamic money would be a fair chunk of that flowing through NZ on a daily basis.

by Spidy Sense | 1st Oct 12, 4:01pm 1349060496

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by Spidy Sense | 1st Oct 12, 4:00pm 1349060419

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by Spidy Sense | 1st Oct 12, 3:59pm 1349060387

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by Christov | 1st Oct 12, 4:10pm 1349061004

Hey Alex ...see if you can do a spot with Cunliffe on the matter...I'm not really sure what Shearer was on about there.....I'm sure Cunny won't mincey pie around with magic bullet nonsense.

He says "no" an awfull lot doesn't he...?, as a sentence starter I mean....interestingly so does John Boy...all the spin Doctors must attend the same college I guess, e.g. you ask an awkward question, He say's no and then talks some bollocks, the punter assumes his no was authorative, you are sort of corrected, he sounds like he said something when he didn't say anything at all......

Alex ....try asking the same question three times......if asked why , tell them you were n'ot satisfied with the previous answers, so you though you'd hold out for a better one.

Seems his entire thrust was about a point of difference by which we can measure their Policy on it , but fails to present any formed hypothosis as to how effective the "hands on" approach would be.

Not only is he invisible mostly, he said a lot and nothing at all......except , we are different, but we don't guarantee different outcomes.

by Alex Tarrant | 1st Oct 12, 4:49pm 1349063345

Hi Christov,

I've filmed a longer one I did with David Parker which I'll put up tomorrow or Wednesday. Time constraints on the telly.

Cheers,

Alex

by scarfie | 1st Oct 12, 6:48pm 1349070480

Alex while doing a uni assignment on the Acropolis I chanced across of couple of classical Athenian names that sparked an interest. Demosthenes and Aeschines had a long running debate about truth in rhetoric. This got me thinking.

We all know politicians are liberal with the truth, but the reality is these guys full time job is the develop the skill to pull the wool over our(your) eyes. You are going to have to come to grips with the fact that these bastards will slip and slide around you everytime unless you develop the skill to counter them. You guys at interest.co are pretty much the best around at this stage, but these guys are pros and still showing you(not just you personally) up as amateurs.

There are regulars here that I communicate with privately and the consistent wish of all of them is that you guys start asking the difficult questions. Perhaps that is a little unfair when you are up against professional liars, but the challenge is there for you to lift your game and go toe to toe with these politicians.

by iconoclast | 1st Oct 12, 7:05pm 1349071540

YES. Alex, as part of his journey on the road to "professionalism" should research and study the video of Simon Walker interviewing Prime Minister Robert Muldoon. A good lesson from the archives.

by scarfie | 1st Oct 12, 8:13pm 1349075591

From Iain Parker on the facebook wall of David Cunliffe:

Hey David, thanks for asking.

1. Would you say true or false to statement that every dollar originated in New Zealand enters circulation somewhere in the economy as interest bearing debt owed to non-government private lending institutions?

2. Could you please tell me which way Labour Party members of the Finance and Expenditure select committee voted on the covered bond bill?

http://www.interest.co.nz/bonds/61250/parliamentary-select-committee-rubber-stamps-covered-bond-bill-saying-such-bonds-could-m

3. Are you aware of how first New Zealand Labour Government funded the start of the State Housing Project 1936 with an 'issue' of sovereign dollars borrowed from no-one and owed to

no-one?

4. Are you familiar with David C Korten and Michael Hudson?

I delivered in person to parliament the printed hard copies of what I believe to be the most seminal documents of these most credible men at which time I was assured they would be passed on to your goodself. They were these documents below. Could you please confirm if you recieved these documents and if you have read them?

David C Korten CV http://www.davidkorten.org/author-bio

seminal document http://www.yesmagazine.org/pdf/liberateamericadownload.pdf

more great articles from Korten http://www.yesmagazine.org/blogs/david-korten/david-kortens-blog

Michael Hudson CV http://michael-hudson.com/bibliography-for-dr-michael-hudson/

Seminal document http://ineteconomics.org/sites/inet.civicactions.net/files/hudson-michael-berlin-paper.pdf

more articles from hudson http://michael-hudson.com/

5. In an entirely private interest bearing debt based money system would you say true or false to the statement – growth can not exceed the debt you are forced to take on in attempt to achieve the growth?

by Bobbob | 1st Oct 12, 11:24pm 1349087045

Oh if only we had decent journos in NZ, that was great to see that old interview. I am so glad Close up is being dumped, Mark Sainsbury is like being interviewed by a kindly old grand mother and Campbel is a waste of space. Tonight on Campbel it was like watching an episode of Sesame street, who the hell thought it was a good idea to let those kids run lose around the studio? And who the hell cares about who shot and cut a news piece. Dump the lot of them. (quick edit for punctuation)

by Christov | 1st Oct 12, 8:03pm 1349074984

Cheers Alex...Parker will have to do

by Stephen L | 1st Oct 12, 5:27pm 1349065660

It seems he knows what needs to happen in terms of the exchange rate, and monetary policy. (Does anyone who knows anything about it not really know what the solution is.)

But like National he doesn't want to be the one who ends up telling the people that any medium term solution to our economy does include the prices of imported goods and services increasing relative to the prices for New Zealand made goods and services. So they will have to pay more for petrol and other things, but make more for helping make and sell things that are marketable overseas, or that replace goods that would otherwise be imprted.

So as a cop out he is fudging around the issue, and palming the bad news delivery off to the Reserve Bank. Marginally better than National, who are so populist they won't even give the Reserve Bank a chance.

Anyone who wants a counrtry that gradually regains some ownership of productive assets; with them not being in hock, or actually owned offshore, should keep pushing for change. And they should want us to have some control over that process, and not either have it forced on us; or have us as more tenants in our own land than we are now.

Hopefully Parker will be clearer on what he would expect the Reserve Bank to do.

by steven | 1st Oct 12, 8:22pm 1349076144

The state of the UK economy can substantially be laid at Gordon Brown's feet. So he's a leper? good riddance the arogant so and so deserves it IMHO.

regards

by Christov | 1st Oct 12, 8:21pm 1349076066

Read aboot forty or so of em SoreL....yeah some pointed , some funny, some bitter....pretty much what you'd expect post Gordon Brown's moment in the sun.....but not too burnt mind....he was careful not to color up too much.

by steven | 1st Oct 12, 8:18pm 1349075928

Some good Qs Alex....Shearer saying no but actually yes in the same sentence...

LOL

regards

by Christov | 1st Oct 12, 8:29pm 1349076580

That's right Steven , some very good lines of questioning by Alex, but unsatisfactory responses by Shearer in terms of depth and qualification.

One was talking specifics, while the other generalised as if selling a big picture without the substance...or the Black n White if you like. .

by Nic the NZer | 1st Oct 12, 8:38pm 1349077105

Actually I thought there was only one good question, and Mr Tarrant kept asking it over and over and over and over again, it seemed like Alex didn't understand the relatively straight forward answer.

I thought Mr Shearer, was the one expanding the discussion, and I think he gave basically straight forward answers to the questions.

by Christov | 2nd Oct 12, 8:25am 1349119545

Well Nic the NZ'er...I'll try watching it again as I appreciate we can all see a different picture based on bias n wot not, but I think I'll arrive at this point below again.......

Seems his entire thrust was about a point of difference by which we can measure their Policy on it , but fails to present any formed hypothesis as to how effective the "hands on" approach would be.

Not only is he invisible mostly, he said a lot and nothing at all......except , we are different, but we don't guarantee different outcomes.

by Mike B | 1st Oct 12, 9:38pm 1349080731

The real problem we have is that no matter who is in power the media run to the opposition party and ALLOW them to winge and moan and the opposition is more than happy to use this for cheap political point scoreing. This goes on year after year, election after election and we get nowhere and the journalists pat themselves on the back thinking they are doing a good job (see Monday top 10, No9 point No5)

Journalist SHOULD be saying

"What is your parties policy on this matter"

and if they don't have one ask "Why not"

AND refuse to report party politics winging to score points

We want to know WHAT the opposition is going to do about it when they become the government so they can be held to account.

For example

What will Labour do about asset sales when they become the government?

Will they

1/ Do nothing

2/ Buy them back as Winstone said

3/ Tax there profits so high that they become worthless and then buy them back.

What will they do? I still don't know because the media wont ask.