Key defends high NZ dollar
Tuesday 26 Feb 2013 8:52 a.m.
Prime Minister John Key says there are advantages to keeping the New Zealand dollar high – such as keeping petrol "cheap" – as debate continues to rage over the kiwi's strength.
Unions and the manufacturing industry have blamed the dollar for a string of job losses – potential and realised – at companies such as Contact Energy, Mainzeal, Telecom, Summit Wool Spinners, New Zealand Post and Solid Energy.
But Mr Key told Firstline this morning the overall numbers are "very small" in relation to the entire workforce.
"If you think that there's over 2 million people in the workforce in New Zealand… and then you think about the individual losses that we might look at, say 90 people involved overall with say, New Zealand Post. That is very small in relation to the overall number.
"I'm not saying it's not tough, and I'm not saying we don't have enormous sympathy for those that lose their jobs… I'm simply saying if you look at the overall data of what's happening at a macro level in the economy, business confidence is up, consumer confidence is up, the Quarterly Employment Survey, which is the indication of whether employers think they are going to take on people, is up, and manufacturing data… is up."
But Helen Kelly, president of the Council of Trade Unions, says the Government has "little plan or hope" for stemming what it calls a crisis.
"You've got the manufacturing sector in crisis because of the dollar, which is affecting Summit and all of the other manufacturing jobs we've seen," Ms Kelly told Firstline. "As those jobs go, retail starts to decline – people aren't spending money, and that's what will be happening in these retail chains… Telecom and Contact, in my view, are just being greedy, and are laying off staff when they're making record profits."
She says the kiwi is being kept high by currency speculators, investing in what some are now calling the "new gold".
"They're not making anything else, they're not the productive sector – and at the same time we're seeing the manufacturing economy collapsing and we're hearing from manufacturing businesses that the Government should step in and make more effort to find a middle ground around our currency… Even the IMF is now saying that countries should step in to do more to control their dollar."
But Mr Key doesn't see any need to step in, even suggesting that having a strong currency is in the best interests of not only consumers and importers, but manufacturers.
"For a very long period of time the United States had a policy of wanting what was known as the 'strong dollar policy' – they had it for decades – and it's because they knew that when they had a strong dollar, their consumers had huge purchasing power," says Mr Key.
"It effectively internationally made them wealthier. So for a lot of New Zealand consumers… their life is actually much better because of the strong dollar. They can either buy things or import it, inflation or petrol's cheaper, it's not a one-way street.
"Even for a lot of manufacturers, it's a big help to them. There are obviously some it affects, I understand that completely, but we were no terribly wealthy country when the exchange rate was down at sort of 35 or 40 cents, so I'm not sure we entirely want to have that either."
Ms Kelly has called on the Government to stop giving major contracts to foreign companies and invest more in infrastructure.
"The Government could stop the austerity measures and start driving the economy through infrastructure development, investment in things that need to get done, things like rail, roads, schools, health – all of those things would create jobs. They've got money, they should be doing it. They gave massive tax cuts, they should be getting some of that money back and investing in the New Zealand economy.
"The Government's not buying New Zealand goods, we saw that with the rail carriages where they favoured Chinese manufacturing over our own manufacturing… They should be ensuring that when they're buying things that they're favouring New Zealand products when they're doing that and investing in jobs."