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The Green Party's radical proposal to have the Reserve Bank print money to help bring down the dollar looks unlikely to go anywhere.
Co-leader Russel Norman yesterday unveiled his party's plan to see the new money invested in government earthquake bonds to fund the rebuild of Christchurch and refill the Natural Disaster Fund.
As well as the quantitative easing approach, the proposal would:
- Give the Reserve Bank a broader mandate for lowering the official cash rate and new tools for managing asset bubbles.
- Introduce a capital gains tax, though not on family homes.
- Dr Norman said quantitative easing had been adopted by many countries, including the United States, and New Zealand was one of the few Western countries holding on to traditional monetary policy.
The Greens' proposal would improve New Zealand's competitiveness, boost jobs and prevent speculators from cashing in on the high New Zealand dollar.
"The global financial crisis has changed all the rules and National's doctrinaire approach is no longer serving our economy well," Dr Norman said.
Under the proposal, quantitative easing would be done in stages, starting with about $2 billion, then it would be up to the Reserve Bank governor.
Dr Norman said New Zealand's high exchange rate was hurting the manufacturing sector, compelling skilled workers to leave the country and driving down the benefit of international tourism.
Opponents say quantitative easing would drive up the price of imports making petrol, electronics and other everyday goods more expensive.
But Dr Norman said it was better to manage the dollar down today, rather than wait for the "inevitable sudden correction and the severe shock . . . that will entail".
National does not support the policy with Economic Development Minister Steven Joyce saying it was "fanciful economics" to suggest printing money would fix the economy.
Such moves were popular only in countries with crippling debt levels where they had run out of options, he said.
"They then want to abandon sensible monetary policy and whack up the cost of living for every New Zealander, and they want to pay for the Christchurch rebuild by printing money."
While a capital gains tax was Labour policy, the party does not support the enforced use of quantitative easing.
Labour finance spokesman David Parker said that was a decision for the Reserve Bank, however he supported the widening of the bank's governing legislation.
The Reserve Bank governor should not be limited to only considering price levels when deciding on the official cash rate, Mr Parker said.
"I say what we should do is change the Reserve Bank Act . . . but then for me it's up to the Reserve Bank of New Zealand, independent of me or Russel Norman to say what is the best thing to do to pay more attention to the exchange rate."
The issue of paying for the Christchurch rebuild was a separate one, Mr Parker said.
It should not be confused with the need to update monetary policy.
NZ First leader Winston Peters has drafted a member's bill which would require the Reserve Bank to look at the growth rate, unemployment and exports as well as the traditional measure of inflation.
The Green Party's radical proposal to have the Reserve Bank print money to help bring down the dollar looks unlikely to go anywhere.
Co-leader Russel Norman yesterday unveiled his party's plan to see the new money invested in government earthquake bonds to fund the rebuild of Christchurch and refill the Natural Disaster Fund.
As well as the quantitative easing approach, the proposal would:
- Give the Reserve Bank a broader mandate for lowering the official cash rate and new tools for managing asset bubbles.
- Introduce a capital gains tax, though not on family homes.
- Dr Norman said quantitative easing had been adopted by many countries, including the United States, and New Zealand was one of the few Western countries holding on to traditional monetary policy.
The Greens' proposal would improve New Zealand's competitiveness, boost jobs and prevent speculators from cashing in on the high New Zealand dollar.
"The global financial crisis has changed all the rules and National's doctrinaire approach is no longer serving our economy well," Dr Norman said.
Under the proposal, quantitative easing would be done in stages, starting with about $2 billion, then it would be up to the Reserve Bank governor.
Dr Norman said New Zealand's high exchange rate was hurting the manufacturing sector, compelling skilled workers to leave the country and driving down the benefit of international tourism.
Opponents say quantitative easing would drive up the price of imports making petrol, electronics and other everyday goods more expensive.
But Dr Norman said it was better to manage the dollar down today, rather than wait for the "inevitable sudden correction and the severe shock . . . that will entail".
National does not support the policy with Economic Development Minister Steven Joyce saying it was "fanciful economics" to suggest printing money would fix the economy.
Such moves were popular only in countries with crippling debt levels where they had run out of options, he said.
"They then want to abandon sensible monetary policy and whack up the cost of living for every New Zealander, and they want to pay for the Christchurch rebuild by printing money."
While a capital gains tax was Labour policy, the party does not support the enforced use of quantitative easing.
Labour finance spokesman David Parker said that was a decision for the Reserve Bank, however he supported the widening of the bank's governing legislation.
The Reserve Bank governor should not be limited to only considering price levels when deciding on the official cash rate, Mr Parker said.
"I say what we should do is change the Reserve Bank Act . . . but then for me it's up to the Reserve Bank of New Zealand, independent of me or Russel Norman to say what is the best thing to do to pay more attention to the exchange rate."
The issue of paying for the Christchurch rebuild was a separate one, Mr Parker said.
It should not be confused with the need to update monetary policy.
NZ First leader Winston Peters has drafted a member's bill which would require the Reserve Bank to look at the growth rate, unemployment and exports as well as the traditional measure of inflation.
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