9 Nov 2010

PM denies putting pressure on central bank governor

6:30 pm on 9 November 2010

The Prime Minister says he rings Reserve Bank governor Alan Bollard regularly, but denies he is putting pressure on him.

John Key says his public comments that there is no point intervening to bring down the value of the surging New Zealand dollar would also not influence Dr Bollard.

The dollar has been trading at about US79 cents in recent days, following actions by the United States Federal Reserve that have effectively weakened the Greenback.

Under the Reserve Bank Act, the central bank operates independently within its policy targets agreement with the Government, removing politicians from interfering with monetary policy on a daily basis.

Mr Key, a former currency trader with Merrill Lynch, rang the governor as recently as last week, but says he is not interfering with Dr Bollard's independence.

"He's the Reserve Bank governor and I respect what he does, but my views have been formed over a long period of time being engaged in the international financial markets, and if I thought it would work, it would benefit New Zealand, I would do it," Mr Key says.

"I think most people know that I'm not a hard-core right-wing ideologue, but in this stuff ... I think we're on the right track and I don't think there's a lot we could do that would change."

Labour leader criticises inaction

Meanwhile, Labour Party leader Phil Goff has criticised the Government for doing nothing about the high value of the dollar.

"The dollar is at such a high level that it's helping to destroy manufacturing industry in this country at the moment.

"We have to take that seriously, and I would expect the Government with its army of bureaucrats to have some answers - so far, we've seen none."

However, Mr Key is adamant that there is nothing the Government, or the Reserve Bank, can do to influence the value of the dollar.

Mr Key's stand prompted Labour's finance spokesperson, David Cunliffe, to criticise the Government's approach in a question to Finance Minister Bill English in Parliament on Tuesday afternoon.

Mr English said countries that fixed their exchange rates either had billions of dollars in the bank or were typically not democracies.