Greens call for quantitative easing
Sunday 7 Oct 2012 12:12 p.m.
Greens co-leader Russel Norman issued a solid call for a quantitative easing
The Green Party is proposing a quantitative easing to fund the Christchurch rebuild, refinance the Earthquake Commission and bring down the New Zealand dollar.
The party has long called for a broader mandate for the Reserve Bank of New Zealand, the country's central bank, and a comprehensive capital gains tax on property, excluding the family home.
Today, Greens co-leader Russel Norman issued a solid call for a quantitative easing, suggesting the central bank add money to the economy to reduce the value of the currency.
"We propose the Reserve Bank purchase, in a staged way, earthquake recovery bonds to fund the rebuild of Christchurch and overseas assets to rebuild the Natural Disaster Fund more quickly.
"Both measures will have an immediate downward impact on our exchange rate," he said.
Buying Christchurch earthquake recovery bonds would reduce the need for the Government to borrow offshore and buying overseas assets to restore the Earthquake Commission's Natural Disaster Fund would prepare the country better for any future natural disasters.
He told Q+A that stages of quantitative easing would be equal to about 1 percent of GDP or $2 billion.
He said most of New Zealand's trading partners had undertaken quantitative easing programmes without setting off inflation.
The Greens' plan of "essentially creating credit" was tailored to New Zealand's situation.
The value of the New Zealand dollar was determined by supply and demand. The policy would increase supply and deal with specific economic problems at the same time.
The Council of Trade Unions welcomed the policy statement by the Greens.
"Clearly there are risks and benefits in all such policies, but the downside of current policies are all too apparent and quantitative easing should be among the options considered," CTU economist Bill Rosenberg said.
"At a time of low inflationary pressures because of stagnating household incomes and higher debt repayment, the risks are much less," he said.
First Union, which represents 27,000 people, also hailed the Greens' proposals, saying there was consensus that current monetary policy settings were broken.
"Sitting on our hands and doing nothing about the high New Zealand dollar is not an option," general secretary Robert Reid said.
The New Zealand was at 82.41 US cents on Friday.