Opinion: Why do we bash our exporters every time the economy starts to do well?

Opinion: Why do we bash our exporters every time the economy starts to do well?

The New Zealand dollar has risen by 73% from a low of 49 USc in March 2009 to a post-float high of 85 USc by July 2011.

By John Pagani*

This is nuts.

What's driving our dollar so high?

Yesterday's pleasing GDP figures is what. See Alex Tarrant's full article here.

As our economy picks up, the Reserve Bank is obliged by law to do what it can to respond by trying to smash GDP back down again.

By law the Bank is not allowed to look at what is best for our long term GDP growth. It can only look at whether increasing GDP is going to push demand up, and therefore prices. That's why we have low inflation and low growth.

Every time there's some growth, the Reserve Bank pulls out a giant sledge hammer and smashes the living daylights out of it. It increases interest rates. The prospect of high interest rates is driving the exchange rate high as all the hot money flows in chasing those interest margins paid by mortgaged suckers like me.

Higher interest rates and a high dollar are exactly what we don't need when the economy is getting off the ground.

We need to let some of those overseas successes flow home and create jobs and more consumer spending.

When the dollar is high, all we're spending on is cheaper imports and trips overseas.

Our terms of trade are at record highs because of good global demand for commodities.

Those good prices help our GDP along, despite the Government's economic mismanagement. We should be encouraging growth where we can get it, not reacting as if it needed to be driven out.

Policy encourages debt and overseas ownership, punishes businesses and consumers with interest rates, and punishes exporters with a high dollar and excessive currency volatility.

The high dollar we're getting now is exactly what we don't need.

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*John Pagani is an independent political consultant and writer who has worked as an adviser to Labour Leader Phil Goff. He writes his own blog at Posterous.

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11 Comments

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perhaps you could ask your old boss how the CGT, endless fiddling with tax rates and borrowing even more than the present govt is , is going to help exporters ?!

This is indeed nuts.....

........" the Reserve Bank pulls out a giant sledge hammer and smashes the living daylights out of it ".......

Come on, two temporary interst rate rises in five years compared to how many quarters of growth, especially outside the 1-3% CPI band???

Savers are getting getting hammered more than those poor old over-leveraged exporters; they just can't handle their debt habbit.

You are saying that we are better to allow the drug pusher (banks) to keep pedding thier wares (debt) at lower cost (interest rates).

The good Dr knows what the paitent needs (thats why he is the Dr. ) we all must take or medicine!!!!

Get over it! (debt that is)

John , I dont know where you studied economics , but I would like to see the textbook that says an increase in Gross domestic Product is inflationary .

Inflation can arise in times of zero growth ( some economists call this stagflation) and negative growth ,.

Remember we need to give savers a reasonable return on thier savings , in line with the return for other risk free assets . Right now Kiwi savers are getting shafted 

To suggest increases in interest rates are purley  driven by an increase in GDP is disingeneous.

You can bet that Dr Bollard would love to see and increase in GDP , and in fact he almost constantly bemoans the fact that the recovery is not taking off 

"We need to let some of those overseas successes flow home and create jobs and more consumer spending"  ..

Q: who would have the right mind to come back to NZ only to face more taxes... CGT (on business). 

I'm glad it's headed Opinion.. but frankly your opinion is wrong

The debt junkie speaks here…….http://johnpagani.posterous.com/

His words…….

“………….interest margins paid by mortgaged suckers like me.”

Nice and self-serving I see, so, is he an exporter? Or does he just want another fix at lower rates????? 

This spin merchant advised goofy...so the puzzle is complete...who was behind Labour's foolish CGT election gamble!....is it possible the advice which goofy took was deliberately silly but sold to him as the right way to play the public!

Ok Im bringing some grunt to this argument, understand Ive been hunting pheasants and quail all afternoon and stopped for a couple of wiskeys on the way home, here goes this guy is onto it.

 

 

drjonathanwilson

3 hours ago

 

Fiat money's achilles heel is continuous fiscal deficits. Fiat money dies when big, bigger, biggest goverment spending kills the private goose that lays the golden eggs. 

The bankruptcy of the state is in the end reflected in the bankruptcy of its economy and the economy is the basis by which fiat money draws its validity.

Fiat money is superior to the gold standard as it allows for  sustainable growth and wealth accumulation at a rate impossible to achieve with a gold standard - provided state spending relative to income is managed responsibly and ethically. 

Therefore it is perhaps due to the nature of mankind (the corruption of the open public purse) that such a fiat system has a finite lifespan and needs renewal from time to time.  

The gold standard is a poor substitute for what can be achieved with properly managed fiat money.

Jonathan

 

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/863864...

Rule 1 -
BY CONTROLLING ENERGY
WE CAN CONTROL NATIONS.
     ---------------------------------
BY CONTROLLING FOOD
WE CAN CONTROL INDIVIDUALS.

Mr Bollard will follow Australia lowering interest rates further. Lowering rates worked nicely for NZ, it brought growth and jobs... I don´t see why should he hike.

Our high exchange rate has and contiues to kill off our productive export sector.  Three things push up our exchange rate.

1 Our endless capacity to live beyond the means that our exports will support.  i.e we are not as weathy as we would like to believe.  So we have an ongoining need to borrow overseas funds or sell NZ assets = net inflow of foreign capital pushing up our $.

2 Our excessive propensity to speculate with borrowed funds also reguires an inflow of overseas funds.

3 There is a very large worldwide currency trading and speculation market in which our currency bobs arround and is strongly affected by the sendiments that prevail in this market. 

Pain is the only thing that will change the first and perhaps the second.  A CGT will certainly affect the second.  A 0.5% stamp duty on foreign currency transactions should go a long way to stopping the third, and could be redistributed to hard working tax payers to compensate them for the small affects that it would have on exports and imports.