By Alex Tarrant
Labour leader Phil Goff has reiterated his party's desire to change New Zealand's monetary policy framework, saying in a speech today Labour would give the central bank more tools to intervene in currency markets.
Goff also flagged tax changes under Labour, saying National's policies were putting a greater share of the total tax burden on middle income earners, whereas "the squeezed middle will pay a lower share of total tax" if Labour were to win the next election.
Goff's comments come as the government's accounts show the government ran a NZ$4.4 billion deficit before investment gains and losses in the four months to October 31, NZ$1.9 billion higher than forecast in the May 2010 budget.
"We have already announced reform of the Reserve Bank and monetary policy to make interest rate and exchange rate policy more supportive of exporters," Goff said in his last major speech of the year in Auckland.
"We will keep in place the Bank’s operational independence and the current 1-3% inflation target, but widen its objectives to help exporters. We will equip it to intervene more aggressively. It will have new tools to control liquidity," Goff said.
"It is clear persistently high interest rates and a volatile New Zealand dollar are causing deep structural problems for our economy. New Zealand exporters are at a disadvantage against overseas competitors who are able to fund their activities at a lower cost. Our exporters have to plan for the value of the dollar changing at great speed and little predictability," he said.
"Other countries achieved control of inflation without interest rates staying higher than international averages over time, and so should we."
'Middle class to shoulder less of the tax burden'
Meanwhile, Goff flagged tax changes if Labour were to win the next election.
"By paying debt down more slowly, National is pushing more of the total tax load onto future generations. They’re also putting a greater share of the total tax burden on middle income earners. We won’t," Goff said.
"The squeezed middle will pay a lower share of total tax," he said.
"We will crack down on avoidance so everyone pays their fair share.
"Overall, our fiscal stance is more responsible," Goff said. "Therefore it comes with strict limits on new spending."
"Any major new social spending will have to create jobs, help to ease the cost of living for families or ensure that children are getting off to a great start in life," he said.
"Any other major social spending will need to be paid for by reallocating spending," Goff said.
"This is a big call, but it’s in the interest of our economy today and in the future to pay down net debt over the business cycle and to be disciplined in our spending," he said.
"What this means overall is that there will be a much more important debate about active management of the economy for higher incomes and better jobs.
"National’s approach is more passive, and more trickle down. They believe the jobs will come if you cut top tax rates. But the jobs haven’t been coming."
(Updates with tax comments)
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