Skip to content.
Updated at 9:04 am on 9 October 2012
Prime Minister John Key has dismissed a Green Party suggestion that the Government should print more money to bring down the high value of the New Zealand dollar.
The Greens want the Reserve Bank to consider the exchange rate as well as inflation, and to cut overseas debt by printing an extra $2 billion to buy the Government's earthquake bonds.
The Council of Trade Unions and some economists back the party's proposal to tame the dollar and pay for the rebuild of earthquake-hit Christchurch by what is known as quantitative easing - printing more money.
John Key said on Monday that Zimbabwe has printed money - and it has only made that country poorer.
He said other countries, including those in Europe and the United States, have been printing money recently because their economies are in such bad shape, but New Zealand is not in the same position.
"I'd just encourage people to take a step back in their living rooms and think about the logic of this.
"If printing money is the way to go and that's going to bail out our problems in Christchurch, why don't we just print lots of money, give it to every New Zealander and they'll have a great Christmas. The reality is, it's a bit of a fool's paradise."
Mr Key says printing money would push up the price of virtually everything that people buy and rejects any suggestion printing it would make life easier for manufacturers.
The Engineering, Printing and Manufacturing Union is holding a summit on Friday to discuss what it calls the jobs crisis in manufacturing, but Mr Key says there is no crisis, and there has been a rise in the number of people employed in manufacturing in the past four years.
Labour's Economic Development spokesperson, David Cunliffe, says the number of actual jobs in manufacturing has gone down by 40,000 in that period.
The Prime Minister says the best thing the Government can do is get its tax policy right and cut compliance costs as much as possible to make manufacturers more competitive.
Economic Development Minister Steven Joyce described the Green Party's proposals to drive down the New Zealand dollar as half-baked, saying change isn't needed as the economy is stable.
PHOTO: NATIONAL PARTY
Mr Joyce says the Government is taking a sensible and conservative approach and the proposals would harm New Zealand's reputation.
"What the Greens are proposing would literally cause the international community to doubt New Zealand's economic priorities quite significantly, and it literally would be a case of talking the economy down to other countries which are in much tougher situations than we are."
Many of New Zealand's key trading partners, including Britain, the European Union and the United States have carried out quantitative easing in the past couple of years, but Mr Joyce says the approach has only been embraced by countries in crippling debt and hasn't worked in Japan and Switzerland.
Mr Joyce told Radio New Zealand's Morning Report programme on Monday the dollar is high because the rest of the world sees the New Zealand economy as having better prospects than those of Britain or the US.
Greens co-leader Russel Norman says the idea of using monetary policy to address the exchange rate level as well as inflation has become mainstream thinking, backed by such figures as the chief economist of the International Monetary Fund.
Dr Norman told Morning Report research indicates countries that have printed more money have not at this stage experienced inflationary problems.
Employers and Manufacturers Association chief executive Kim Campbell says printing more money would make overseas banks reluctant to lend to New Zealand at a time when businesses are in desperate need of investment.
Mr Campbell says it is up to businesses to become more productive and for the Government to encourage foreign investment and cut red tape.
The association points out that, while the high exchange rate makes it tough for exporters, many businesses rely on imported goods, such as petrol, so the high dollar isn't all bad.
Council of Trade Unions economist Bill Rosenberg says the high exchange rate is costing jobs, as exporters can't compete with the flood of cheap imports.
He says with unemployment heading towards the 7% peak of the 2008 global financial crisis, the Government should abandon its hands-off approach to monetary policy.
However, Institute of Economic Research principal economist Shamubeel Eaqub says bringing down the dollar wouldn't necessarily stop manufacturing jobs going off-shore and quantitative easing could turn New Zealand into the "Zimbabwe of the Pacific".
"In the short term you would get the benefit of essentially having free money, but over the longer term it would reduce the value of the New Zealand dollar and raise the cost of living for all New Zealanders."
Consultancy firm BERL says the manufacturing sector is being destroyed by the high exchange rate, which is out of kilter with the rest of the economy.
Chief economist Ganesh Nana supports the Green Party proposals, saying New Zealand needs an appropriate exchange rate in order to create a high-value manufacturing industry that can compete internationally.
Copyright © 2012, Radio New Zealand
Audio is categorised based on the frequency of the programme it was heard in. Click on the headings below to access the programmes. For the most recently published audio, go to the latest audio page.
Streams are in Windows Media format. Mac and Linux users may need to install additional software. Get help with audio
A selection of music interviews, reviews, videos, concerts, sessions, and performances.
Downloads and podcasts are available for selected programmes. Our podcast page has a complete list of feeds.
Help on using online audio: formats, software, podcasts, downloading, and troubleshooting.