In which I agree with Steven Joyce

By Paul Walker 16/09/2012

Sad but true. From the NBR,

“There’s no doubt about that, and there’s never been an exporter that doesn’t want to lower exchange rate, no matter what level” he said.

Mr Joyce said that the dollar “may” hit parity with the US dollar.

“But that’ll be because the US is completely in the toilet,” he said.

“Ultimately it’s market fundamentals.

“And so ultimately nobody’s going to bid the New Zealand dollar beyond what they consider it should be at.

“Now even if it bounced through say for example the quantitative easing that’s coming through at the moment, it will come back again.

“Because fundamentally the value of the New Zealand dollar is determined by what the world believes is the future of the New Zealand economy, and if they bid it up too high, then they will look at it and say well actually we’ve bid it up too high, and we’ll bid it down again.”

He’s basically right. And when will we get over the mercantilist obsession with exporting that underlies the ‘dollar must be lower to help exporters’ arguments?

The NBR goes on,

Mr Joyce said the private members bill being introduced by Winston Peters to alter the Reserve Bank’s objectives was a “snake oil solution that would achieve nothing.”

Actually it may achieve something, but it would be all bad.


Mr Peters wants the primary function of the Reserve Bank to be broadened to include other critical macro-economic factors such as the rate of growth and export growth.

So given you need as many instruments as objectives but new instruments is Winston going to give the Reserve Bank?

For more on why Winston’s idea is ‘snake oil’ see TVHE and Anti-Dismal.