Matt Nolan translates what Labour is proposing:
Tags: Matt Nolan, Monetary Policy, Phil Goff
Labour goals were:
- a stable and competitive exchange rate;
- reduced interest rates for businesses and home owners;
- continued priorities of price stability and low inflation;
- to guard against expectations of price rises.
So, with goal 1 they want to reduce the flexibility of NZ$ prices, which will lead to higher unemployment and a worse allocation of resources. Furthermore, they want to keep the dollar low which implies subsidising exporters to the cost of households in the short-term.
With 2 they want to punish savers.
And with 3 and 4 they want to contradict themselves – as by limiting price flexibility and holding the exchange rate and interest rates down they WILL drive an increase in inflation expectations, dump price stability, and remove any chance of a low inflation environment.