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Labour's finance spokesman David Parker is told by OECD economist that NZ's monetary policy is 'totally crazy'

Labour's finance spokesman David Parker is told by OECD economist that NZ's monetary policy is 'totally crazy'

By David Parker*

I am travelling to the US and UK to discuss my ideas on monetary policy with some of the best economic minds in the world, including former World Bank chief economist Joseph Stiglitz, Harvard academic Jeffrey Frankel and IMF chief economist Olivier Blanchard.

Rudiger Ahrend says:

New Zealand's monetary policy "totally crazy"

We must focus more on our exchange rate

My last OECD meeting was with Rudiger Ahrend, a senior economist at the Structural Surveillance Division, having moved there from the Economics Office.

Rudiger’s undergraduate degree in mathematics was from Germany, his Masters in applied mathematics in economics was from France and his PhD is from the London School of Economics. After some years working in Russia, then as an independent economic consultant, he has been at the OECD for a decade. His publications include various papers on monetary policy and on Dutch disease.

He came straight to the point. There was no ambiguity. In his personal view:

· “It is totally crazy how New Zealand runs monetary policy”.

· “It is the most pure form of inflation targeting of any small country”

· The pure type of inflation targeting New Zealand has run “strikes me as madness”

He believes there is a need to focus more on our exchange rate.

He thinks the differential between New Zealand and overseas interest rates has been bad for New Zealand. He also believes the mix of capital investment in New Zealand has been problematic.

He made reference to changes suggested to “the Taylor rule” for smaller countries.

As we leave Europe to get the views from the IMF and various leading USA-based economists, I am struck by these main points:

· No-one thinks we should ignore inflation.

· New Zealand’s approach to inflation targeting has been extreme.

· Even before the GFC, other countries were more concerned about their exchange rate than New Zealand

· Since the GFC, unorthodox practices have increased, and even the arch defenders of inflation targeting now concede other countries are properly pursuing other interests

· It is common for other countries to use additional mechanisms to guard against liquidity and asset bubbles

· Smaller countries are different to larger economies

· To grow the breadth of our exports we have to counter the additional risks faced by our non-dominant exporters

· Some answers lie in a more nuanced approach to inflation targeting compared with exchange rates, including the greater use of tools other than the interest rate

· Other answers lie outside monetary policy in tax and fiscal and industrial policy, the most important of which is to introduce a capital gains tax.


* David Parker is the Labour Party finance spokesman

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"to discuss my ideas on monetary policy with some of the best economic minds in the world",


Notice that they all go that way - stop 'learning', and start 'discussing my ideas'.


But 'the best economic minds'?  That's not the problem, Mr Parker. Remember the


The best example of promoted to beyond their abilities I have seen in a long time.


Since a fellow from Dipton thought you could treble the population of a finite planet, and thinks you can 'grow' exponentially forever.


Stop being a party hack and try doing something useful. 




So yet another brain dead pollie looking for ideas now he can see the promise of growth is bye bye.

Thank,s now I know hell would freeze over before I'd vote for Labour half wits like this. Sadly there are few if any other options.


1) Inflation is toast, no need to focus on it.....obviously he's a brain dead inflationista....oh wait he's OECD....nuff said.

2) Un-orthoxdox tactics are actually keynesian, almost, just too small, the voodooists like this one just cant bring themselves to do anything, they have made or allowed a 30 year disaster, should all go.





  Maybe we can ignore the current account deficit, maybe we can ignore the contraction of our export base, maybe we should ignore the lack of investment in the productive economy, maybe we should ignore the emphasis on asset speculation,  maybe we should keep on doing what we do in the face of nearly everyone else throwing out the inflation targeting rule book.

Parker is at least thinking about the problem and talking to people who, at the very least, offer a perspective to balance the conviction that we are on the right track, a conclusion difficult to hold if you are an exporter. 

 It’s a bit harder to ignore clear and present pain endured now for over a decade by exporters battling an overvalued exchange rate, when the economic framework hangs you dry you tend to ask why.  The losses inflicted on our tradeable sector by a policy frame work that ignore the currency, ignore private debt and the associated asset speculation will take decades to unwind, if it can be unwound.

Parker it seems is willing to think differently, we need that.