About
Contact
Advertise

Facebook
Twitter

July 17, 2007 4:34pm by David Farrar

Almost there

As one can see the Government’s strategy to keep the dollar below 75c seems to be less than wholly successful.

Share this:

Facebook
X
LinkedIn
Reddit
WhatsApp
More

Pinterest
Print
Tumblr

Like this:

Like Loading…

Email
Facebook
Twitter
Comment33

Uncategorised
New Zealand

Related Stories

Even Helen Clark says Government needs a reopening plan
Views on 2013
ANZ Chief warns of housing bubble

Comments (33)

Login to comment or vote

Paul W

And what precisely would the National party do?
0 0
Log in to Reply
Report
July 17, 2007 4:42pm
TJ

Cutting government spending on bureaucrats might be a good start to undercutting inflation…meaning the RB Governor wouldn’t have so much pressure on him to keep raising interest rates…meaning in turn that the dollar wouldn’t be quite so attractive to the market…QED really…
0 0
Log in to Reply
Report
July 17, 2007 4:47pm
Michael

Why can’t the RB Governor be a little bit ballsie, drop the interest rate and watch the dollar plummet???
0 0
Log in to Reply
Report
July 17, 2007 4:49pm
Porcupine

When we get to 100c why don’t we just adopt the greenback once and for all and be done with it?
0 0
Log in to Reply
Report
July 17, 2007 4:51pm
anonymouse

To be fair, this is not just a NZ dollar story, with the Canadian Loony within spitting of par with the US, Cable being over 2.03, and the Aussie pushing on 90c US,

However, NZs high interest rates are probably the result of strong government spending in a tight economy, which will be compounding the US dollar weakness,
0 0
Log in to Reply
Report
July 17, 2007 4:53pm
Paul W

TJ, as I understand it, and Cullen asked English to clarify today, it is not National Policy to significantly reduce public expenditure on any of the big ticket items e.g. education and health and Labour’s reduce welfare payments… so I’m not sure that what you’re suggesting will have much impact.
0 0
Log in to Reply
Report
July 17, 2007 4:55pm
Kevin

“NZs high interest rates … will be compounding the US dollar weakness”

eh?
0 0
Log in to Reply
Report
July 17, 2007 5:05pm
Ross Nixon

Why not widen the acceptable inflation band to 1 – 5% ?
We wouldn’t need such high interest rates then.

The target band could be changed again in the future. What “set in stone economic rule” says inflation has to be under 3%?
0 0
Log in to Reply
Report
July 17, 2007 5:07pm
Dazedmw

@ Paul W. A slow down in the increase in government spending would help.

@ Ross Nixon. Double the range, double the uncertainty. And where does that logic stop? The next time inflation is sitting at 4.5% and people are complaining that interest rates are too high we change it to 1-7%, right?
0 0
Log in to Reply
Report
July 17, 2007 5:33pm
Paul W

@Dazedmw, Treasury’s advice is that the major cause of inflation is private debt, not public expenditure. Sure it might help, but the underlying causes are not going to be solved by a cut in public spending. Hence my question, what would National do differently?
0 0
Log in to Reply
Report
July 17, 2007 5:47pm
Gerrit

Put a 50% extra tax on all dividends and interest payments leaving the country.

Will slow down all the speculators and leave only those investors that have a genuine interest in growing the New Zealand economy by reinvesting their profits here.

Maybe even add a tax incentive for overseas companies and investment schemers to leave all profits in New Zealand.

Do it overnight so noone can back track.
0 0
Log in to Reply
Report
July 17, 2007 6:09pm
Dave Mann

I’m not all that interested in the dollar’s value… but I’m writing this here ‘coz I can’t find an “insult-or-praise-or-threaten-or-bribe DPF” button on the site..

NICE new design David!!! Looks very slick and, as always, the content is superb.

Cheers

Dave Mann
0 0
Log in to Reply
Report
July 17, 2007 6:10pm
Dazedmw

“Do it overnight so noone can back track.”

Right…. It’s a shame that Clark and Cullen haven’t been given dictatorship-like powers to pass laws at their own discretion. I’m sure that would be a better system…

@Paul W. Well, National would do their part by tightening the purse strings and then let Bollard do his job as it was originally defined. Even Cullen thinks a reduction in spending is a good idea.

http://www.bloomberg.com/apps/news?pid=20601081&sid=aEEgSi3myWaM&refer=australia
0 0
Log in to Reply
Report
July 17, 2007 6:33pm
Muad,Dib"

love the high dollar, getting heaps of stuff from the states , ,i CANNOT get it in NZ, the site Now reminds me of a bright bus stop, my thoughts or a public toilet at 2.00am in the morning, white,clean, um like from a early scene in 2001 a space oddissey
0 0
Log in to Reply
Report
July 17, 2007 6:33pm
peterquixote

$NZ = $USA,
i told you before farrar quote EURO,
don’t confuse NZ with NAT stuff,
0 0
Log in to Reply
Report
July 17, 2007 6:47pm
Paul W

Interesting that the comments about cutting spending are not attributed to Cullen. Regardless, I understand your point.
0 0
Log in to Reply
Report
July 17, 2007 7:11pm
Kiwi Trader

DPF
I do not believe the Government has ever had a level that is ‘desirable’ for the NZD, let alone 0.7500. I forecast on my blog earlier in the year that the NZD/USD would have a crack at 0.7900, and it has. But Anon 4:53 is exactly right, this is a USD story. The AUD, the GBP are at multi year highs, with the euro at the highest level since it was created. OK the TWI is at 20 year highs, but this is due to a range of factors, not just interest rates.
We forget, the cause of higher interest rates is the RBNZ looking to defend against inlation. Look at the latest inflation numbers. Non tradeable at +4.1%. Who is that?… the non competitive parts of the economy, Govt, local Govt, power companies to name a few.
And Paul W…show me where the treasury says that the major cause of inflation is private debt??

[DPF replies: the Govt has not explicitly said 0.75 but that is the level at which the RBNZ started to intervene. I agree it is partly a US$ story but as you note TWI is record high and our interest rates are part of that. ]
0 0
Log in to Reply
Report
July 17, 2007 7:53pm
side show bob

This government is selling hard working kiwis down the drain. Now paying a high interest rate to a bank that has been flooded with overseas money. Now working for some Jap housewife, thanks Cullen. But I guess the socialist’s will be clapping their hands. Soon we will have that equal society, much wanted by the socialists, we will all be fucking poor.
0 0
Log in to Reply
Report
July 17, 2007 7:57pm
Paul W

Kiwitrader – fair cop, I am referring to comments made by Cullen in the House today during question time. That said, the June 7 Statement specifically notes growth in the domestic economy and particularly in housing http://www.rbnz.govt.nz/news/2007/3032038.html. To be fair, it also refers to spending by the government. So, back to my question, what will National do differently? Will it reduce government expenditure; if so, where?
0 0
Log in to Reply
Report
July 17, 2007 8:16pm
Sean

Nice bit of Schadenfreude from David, who is aware that the main rate the exchange rate is climbing is that the markets are anticipating an interest rate hike in the very near future.

Although I dare say he has a mortgage his hopes for national victory are that much more important to him….and in the longer term financial as well as his consulting company will be in a better position to profit from government largesse.

[DPF – oh stop inventing stuff Sean. And the reason interest rates are rising is because the Government and RBNZ did not get inflation under control when it should have several years back]
0 0
Log in to Reply
Report
July 17, 2007 8:49pm
Kiwi Trader

Paul W
Whoever is in power will have to rein in spending. Fiscal policy and monetary policy have to be in sync. They are not at present. It is generally accepted that Govt spending is causing a good deal of the current inflationary pressures. The RBNZ has recently released a paper on this. It looks unlikely Govt and council spending will be slowed significantly no matter who is in power, (baring a recession like last time) so interest rates and the dollar have to take the strain. Higher interest rates will be around for a long time yet, with probably more to come yet. As to the dollar, it will be, as always, an offshore shock that scares offshore investors. My pick at this stage is that the US property market and a major player collapse will eventually provide the spark to start the scare and investor flight will drive our dollar and other currencies lower. But that could be a long way off yet.
0 0
Log in to Reply
Report
July 17, 2007 9:15pm
ZenTiger

Paul W, is you question “What do National propose after Labour has had 8 years to help get it this way” or “What would National have done has they got into power several years ago, so that the situation wasn’t so bad now”?
0 0
Log in to Reply
Report
July 17, 2007 9:40pm
ben

Never underestimate the ability of a government to achieve the exact opposite of what it intends. In the 1980s the government “fixed” the exchange rate and watched it tumble and tumble. Now they want it down only to see it rise and rise.

If you want to get the dollar down, then nationalise Telecom. And send in the army to do it. All demand for our dollar will promptly disappear.
0 0
Log in to Reply
Report
July 18, 2007 1:07am
Paul W

Zen, that’s a very weak attempt to avoid answering the question.

Rates/inflation have been pretty constant for most of the term of this government and there’s only so much government’s can or should do – unless you’re suggesting abandoning orthodoxy?

The point I’m making is that National are pointing the finger at Labour but I’m yet to hear what expenditure they’d reduce? Is it health funding, education funding, or foreign affairs, defence… If Key and English want to present as serious alternatives, it’d be useful to hear their alternative views?
0 0
Log in to Reply
Report
July 18, 2007 2:16am
Bogusnews

I would have thought there were a multitude places where you could either reduce government spending, or at least do it a lot smarter.

For example health, we now have 12000 beuraucrats and admins in health – one for every hospital bed. Cutting about 11000 of those and putting some of the money into a pay rise for doctors would be a good start.

Cutting the massive pay packets of govt managers would also help (for eg Christine Rankin used to earn $250K as head of Winz, the new guy under Labour earns over $600K). National has just released figures showing that the number of DSW workers have increased by 1200 under Labour – at a time when beneficiaries are supposedly dropping, and the numbers earning over 100K have increased from 35 to nearly 400. The number of new, unproductive consultants under Labour in Wellington alone would cover 15 football fields if you put their desks side by side. I can’t imagine how anyone would think they are all necessary.

Essentially, we are spending an additional 20Bil a year on the state service. Yet the hospital waiting list has doubled, our defence force is a joke, crime is going crazy and over 30% of kids coming out of school can’t read or write.

I would have thought it couldn’t be too hard to find ways to cut costs without cutting services. It also seems incredibly niaive to me to think that increasing govt spending by 20Bil a year has no effect on inflation in an economy as small as ours.
0 0
Log in to Reply
Report
July 18, 2007 6:42am
sam dixon

Kiwitrader is right on several counts:

75cents has never been a government target and certinaly not Government (ieLaobur./progressive) policy.

The run-up against the US has as much to do with the US’s weakenss as anything else, although the hieght of interest rates here cannot be ignored.

and the only way to reduce inflationary pressure in nz, allowing lower interest rates, would be to make fiscal policy more contractionary – that is, run larger surpluses – hands up who wants larger surpluses! yeah, i thought so.

Of course, lowering the dollar now would have one major inflationary impact – the sheilding the rise dollar has given us agianst rising oil prices would disappear.

Someone will now mention supposed low quality govt spending, quoting the Tresaury report on Health (the headline finding of which was that it is impossible to measure producitvty for 75% of health expenditure) or the CIS study that doesn’t even account for inflation and population growth, let alone credibly doing what Treasury can’t and measurig productivity for the whole govt, and they will claim that this fictive ‘low quality spending’ is inflationary – when asked how that is so they will not have an answer, becuase the macro measures – GDP, inflation, productivity, etc are quantitative, not qualitative.

Of course, we could just get over this monetarist fixation on inflation – at low levels it doens’t really matter, i seem to recall a few months ago DPF claimed average 2.9% inflation over the last 5 years made us poorer than 1% inflation would have but no-one could provide any evidence that was true.
0 0
Log in to Reply
Report
July 18, 2007 9:03am
andy

I am with Paul W.

If national wants my vote they will not get it just by being in opposition, I want to know what there ‘IDEAS’ are.

I want to vote this lot out, but national are like your my brother (was) at the moment, saying the opposite just cause he can!

I know they need to keep the tinder dry so to speak, but I am not convinced yet and fatigue could set in.

I think inflation is the elephant in the corner here, and we are importing it faster than japanese used cars, look out below. The NZD will fall and hard as Kiwi Trader has explained. its happened before and history is a great teacher.
0 0
Log in to Reply
Report
July 18, 2007 9:13am
gd

If you have any spare cash buy Uncle Sams sterling and euros. The gains will be large and tax free. Given the kiwi went to 40 last time I reckon its on to go 35/30 sterling 29/27 and euro 43/40 .Chances of a 30% to 50% return in 12 months cant be bad.
0 0
Log in to Reply
Report
July 18, 2007 10:29am
andy

gd: yes but stay away from yen, the MOST manipulated currency on earth! They will take massive losses to hold the yen.

Kiwi trader: Any thoughts on the Bear Sterns Hedge funds with the brand new valuation of near $0, ouch. I think this may be one of those events?

http://online.wsj.com/article/BT-CO-20070717-714573.html
0 0
Log in to Reply
Report
July 18, 2007 10:56am
kiki

Our fuel and at least 40% of our food is imported as well as all those other goodies if our dollar drops substantially due to government intervention all these go up yes our exporters especially dairy would win big time except their fuel and machine costs. You would have massive inflation pressures in parts of the economy again.

The RBNZ is there to stop Rob Muldoons from screwing our country around again it’s growling but it may need to take a couple of bites out of the government before they listen.

Cheers
0 0
Log in to Reply
Report
July 18, 2007 1:48pm
gd

And that kiki is why the good Dr B is on a horns of a dilemna as they say. If he manages to collapse the kiwi inflation will rocket. If the kiwi was at 60/65 then the pump price of 91 would be $1.75/$1.80 And what about the political damage? Best hope for the Nats is the kiwi comes off seriously end of 1st Q 08 to allow time for pain threshold of middle NZ to be breached in lead up to elections.
0 0
Log in to Reply
Report
July 18, 2007 3:04pm
sam dixon

gd –

good to see its all about winning elections for National, no matter what economy pain is necessary, and the people be damned.
0 0
Log in to Reply
Report
July 18, 2007 3:44pm
andy

hey gd are you the man behind the curtain, pulling the strings?

Sam: I think political affiliations aside ‘gd’ would like to see a sensible NZD value that helps all kiwis.
0 0
Log in to Reply
Report
July 18, 2007 4:20pm

Add a Comment Cancel reply

Login to comment or vote

« Jordan on National frontbench

Making it up »

Donations

You can now donate to Kiwiblog

Exclusive content from DPF on Patreon

Become a Patron!

Never miss a post

Email Address

Join 13K other subscribers

Highlights

Target achieved II
Good progress on attendance
Health Target 5 – elective treatments
Health Target 4 – Specialist appointments

Top Stories

General Debate 03 June 2026
Another British policing scandal
General Debate 04 June 2026
A win for democracy
Abolishing HR
Meet the Greens - ACC
Democrat says lock up the Jews
$600k on a website for a building!
Words that are now meaningless
General Debate 02 June 2026

Recent Posts

Words that are now meaningless 4 June 2026
Abolishing HR 4 June 2026
General Debate 04 June 2026 4 June 2026
Meet the Greens – ACC 4 June 2026
Democrat says lock up the Jews 3 June 2026
Another British policing scandal 3 June 2026
General Debate 03 June 2026 3 June 2026
A win for democracy 3 June 2026
$600k on a website for a building! 2 June 2026
Set housing outcomes not outputs 2 June 2026
General Debate 02 June 2026 2 June 2026
Of course GP wait times will skyrocket under Labour 2 June 2026

Recent Comments

Words that are now meaningless
Melbury
Words that are now meaningless
David Garrett
Words that are now meaningless
tf78
General Debate 04 June 2026
Jethrod
Words that are now meaningless
R
Words that are now meaningless
Ceejay
Meet the Greens – ACC
Paulus
General Debate 04 June 2026
Paulus
Abolishing HR
Rumblestrip
Abolishing HR
Observant Octagenarian
General Debate 04 June 2026
Ross Bayer
General Debate 04 June 2026
david
Abolishing HR
Paulus
Abolishing HR
Paulus
General Debate 04 June 2026
Countrygirl

Links

Parliament fails to defend transparency
No Right Turn
"The principal view of human laws is, or ought always to be, to explain, protect, and enforce such rights as are absolute, which in themselves are few and simple."
Not PC
Word of the day
Hompaddock
The response to Budget 2026 has been unusually muted
Point of Order
When is a Free Speech Union not a Free Speech Union?
The Standard
We Are a Country That Decided Housing Was The Economy
No Minister
My Opening Statement for the UATX Caplan-Jones Immigration Rematch
Utopia
Playing with numbers.
Kiwipolitico
Another non-tariff barrier
Offsetting Behaviour
Rugby Premiership Predictions for Round 18
Stats Chat
Budget 2026
NZCPR
UK Conversion Therapy Ban, Digital ID, Rallies, Elections
Bob McCoskrie's McBlog
A central banker’s fiction
Croaking Cassandra
THE WORKING FROM HOME RACKET BY PUBLIC SERVANTS
No Punches Pulled (Bob Jones)
Tory Whanau may have to sell Wellington mayoralty to make ends meet
The Civilian
The Accidental Engagement
Imperator Fish
Legal Beagle: Election '23: The Special Votes
Public Address
Get Vaccinated Tomorrow Or Shut Your Pie Hole
Cactus Kate
Making this movie might have been a mistake
Liam Hehir
Why I am retiring from political blogging
Kiwi FireWalker

[email protected]

PO Box 12270, Thorndon, Wellington 6144

Facebook
Twitter
FourSquare
Instagram
LinkedIn
Google+

© 2003-2026 David Farrar

Archives
Disclosure Statement
Editorial Policy
Privacy Policy
Complaints Policy
Comments Policy

Design by cre8d

%d