4. JOHN KEY (Leader of the Opposition) Link to this
to the Prime Minister
Does she still have confidence in her Minister of Finance?
Is the Prime Minister worried that New Zealand has some of the highest interest rates in the Western World, that the exchange rate is now on a post-float high, and that the Minister of Finance has no answers for the mess he has got our country into?
Rt Hon HELEN CLARK Link to this
Perhaps I could answer best by quoting from Westpac last week: “It is normal for countries that are doing well to experience higher exchange rates.”
Darren HughesHas she seen any reports on other proposals that might address the increase in the New Zealand dollar?
Rt Hon HELEN CLARK Link to this
Yes. I did see a report that recommended having a currency union with Australia to try to halt the rise of the exchange rate of the New Zealand dollar, which would, of course, mean giving up all of New Zealand’s sovereign control of its monetary policy. That report came from a former foreign exchange trader called John Key.
Has the Prime Minister seen reports from the Reserve Bank, the IMF, and the OECD that all point the finger at the big-spending policies of her Government, the impact they are putting on inflation, and the fact that New Zealand homeowners are now paying a lot more for their mortgages than they otherwise would be?
Rt Hon HELEN CLARK Link to this
What I have seen is any number of reports out of market commentators that point out that we are undergoing probably the biggest commodity price boom since the Korean War wool boom, that the New Zealand economy has been growing for years, that unemployment is low, that Government finances are sound, and that in those circumstances it is not unusual when the US dollar is very low for New Zealand to have a high currency exchange rate. I would also point out, as the member should be well aware, that the Aussie dollar, the euro, and the pound sterling are also historically high because the US dollar is so low.
If the Prime Minister’s answer to the economic mess that her Government has got us into is the one she just gave, why does the Minister of Finance go around all the time coming up with bright ideas that she then overrules and that he will not implement anyway?
Rt Hon HELEN CLARK Link to this
I am well aware that the Minister of Finance did for a time engage with Mr Key on how to address imbalances in the economy and look for alternative tools that might reinforce monetary policy. Of course, Mr Key could not stand up to Mr English.
Is the Prime Minister concerned that despite months and months of speculation on different ideas from the Minister of Finance, he has no solutions to the soaring exchange rate of the New Zealand dollar and no solutions to the highest interest rates in the Western World, and that the only people who are paying for the mess Michael Cullen has created are the homeowners, the borrowers, and the exporters of New Zealand; and is it not about time that they deserved and had a new Government that could actually fix the problems?
Rt Hon HELEN CLARK Link to this
I would be interested to know what is messy about New Zealand having one of the lowest rates of unemployment in the Western World. I would be interested to know what is messy about having a growth rate that, over the last 7½ years, has exceeded the OECD averages. I would be interested to know what is messy about New Zealand dairy prices having doubled in the past year. The truth is that the US dollar is low and other currencies like ours are high. We do have some imbalances. Extra tools to support monetary policy would be helpful, and every single one of them is opposed by the National Party.
Does the Prime Minister support the actions of the Minister of Finance, firstly, to intervene in the exchange rate, I think, roughly about 4c ago; does she support the Minister of Finance’s view, expressed last week, that he may suspend the control of monetary policy by the Reserve Bank governor; and what does she think it does to the confidence of New Zealanders when they see a Minister of Finance who has only problems and, frankly, no solutions?
Rt Hon HELEN CLARK Link to this
The Minister of Finance did not intervene in the currency. The Minister of Finance did not say he was considering using section 12—
Rt Hon HELEN CLARK Link to this
No, he did not. All I can say is that the Leader of the Opposition’s 2 weeks in the sun in Hawaii over the adjournment got to his head.
Does the Prime Minister then support the intervention that the Reserve Bank undertook, on the back of the powers that the Minister of Finance gave the Reserve Bank some weeks ago; and is she aware that it is now sitting on a paper loss of somewhere around NZ$100 million?
Rt Hon HELEN CLARK Link to this
It has been my practice as Prime Minister not to comment on the operation of monetary policy, and I do not intend to.
Rodney HideWhy does the Prime Minister not act to restore the Government’s credibility on monetary and fiscal policy by replacing Alan Bollard with Don Brash, who actually did the job, and Michael Cullen with Phil Goff, who has the ability to put the Government’s finances in order, rather than always blame hard-working New Zealanders for our economic woes, when those hard-working New Zealanders are working harder and harder, and are being taxed more and more, to prop up a bloated and an unproductive Government?
Rt Hon HELEN CLARK Link to this
There seems to be a perception of reality, on the Opposition benches, that is not shared by most market commentators or, indeed, by offshore people. The general perception is that the New Zealand economy is doing rather well, is undergoing a phenomenal commodity price boom, has good growth rates, and has low unemployment numbers and sound Government finances, but that its currency, like that of other like-minded countries, is buffeted by the sharp fall in the US dollar.
Rt Hon Winston Peters Link to this
I seek leave, in the interests of putting to rest that last bit of myth-making by Rodney Hide, to table the figures for the Reserve Bank governor’s performance for 1994, 1995, and 1996, when for 21 months he was outside the zero to 2 band—