What are we to do? Every politician, economist and commentator seems to agree that the New Zealand dollar is valued too high and is damaging our economy.
It’s not a new problem and has a simple genesis. The only instrument the Reserve Bank has available to fight inflation is to raise interest rates. But when it does, as it has regularly in the last few years, investors and currency speculators borrow money overseas at low interest and bring it to New Zealand, where they can get a higher return. This pushes the value of our dollar higher, and we get a lower return for what we sell overseas.
Export industries suffer and we lose manufacturing jobs. The latest involves 350 workers being made redundant at Fisher and Paykel, which is moving a section of its whiteware-manufacturing business to Thailand.
And the extra money coming into New Zealand? As well as fuelling credit-card debt, large chunks go into mortgages, as wealthier New Zealanders buy investment properties. This is part of the reason house prices have climbed out of the reach of ordinary Kiwi families.
The big Australian-owned banks (ASB, ANZ, Westpac and the BNZ) are loving it. In an average year, they reap about $2 billion in profit from New Zealand, but this year the figure will be closer to $3b flowing back across the ditch.
Let’s try to be objective here. We have an economic direction that cripples local manufacturing and destroys quality jobs, makes Kiwi workers redundant, rewards speculators, makes outrageous profits for banks, pushes house prices out of the reach of even middle-class families, encourages irrational spending, drives families into poverty, and the Prime Minister, Helen Clark, says there is no crisis.
It’s only imbalances in the economy, she says. At least this part is right. Those who are suffering are those who work to earn money, while those who speculate are living high.
It is a barely believable scenario for our little country. International financiers, banks and currency speculators are running a very successful farming operation using human sheep in New Zealand to produce their incomes.
So can we beat down inflation only by beating up working families?
It was our politicians, under sustained pressure from the business lobby, who passed the likes of the Reserve Bank Act and the Public Finance Act to reduce the power of politicians to manage the economy.
Business saw politicians as economic meddlers. Liberate the free market from political influence, they said, and all would be well. It was Alice in Wonderland stuff.
National and Labour both took part in this hog-tying of our economy to the dictates of business. Instead of the Government deciding our dollar’s value, for example, it is decided by a cabal of international currency traders, a role John Key filled before becoming National’s leader.
So having largely given up the democratic control of our economy to business, have our politicians learnt anything from the latest economic fiascos? It seems not. The Minister of Economic Development, Trevor Mallard, says that any significant changes to the way the Government manages our economy would have to have the support of both major parties.
In the wake of the parliamentary consensus on the bill to reduce violence against children, Clark says she hopes for more bipartisan co- operation over the economy.
This dead hand of economic correctness, which prevents sensible government intervention in the economy, hangs over New Zealand and the lives of working people. Our quality of life is being reduced. It is not that the Government cannot change the rules, it is terrified to do so.
National’s response has been pathetic. The nice-guys image carefully cultivated by Key and National’s deputy leader, Bill English, slipped last week. Carried away by seeing Labour in trouble, they didn’t criticise the impotence of the Government in managing the economy. Instead, in an opportunistic, self-serving display, Key said the problem was government spending, while English hinted at the need for more labour-market flexibility. We all know what that means. Under National, even more of the pain must fall on working New Zealanders.
Sensible policies such as a capital-gains tax on investment properties have been rejected by the Government, which would prefer to wring its hands helplessly and see Kiwi families suffer, before it challenges our speculators-come-first policies.
Let’s call it what it is: economic correctness gone mad.