By KEVIN TAYLOR
Finance Minister Michael Cullen appears to have defended comments he made in early November that the Government was not "entirely without options" to influence the kiwi dollar's rise against the US dollar.
The defence, made in a speech yesterday, provoked National and Act to claim he had "backtracked on
a backtrack".
On Tuesday Dr Cullen told a wine exporters forum that two key factors were driving the kiwi's rise against the greenback - the general weakness of the US dollar and the New Zealand economy's "out-performance".
"Much as I might wish otherwise, there is nothing I can do to alleviate the perception of current sluggishness in the US economy," he said.
The speech was jumped on by opposition MPs as a backtrack on his comments to the finance and expenditure select committee in November.
But yesterday Dr Cullen said in another speech that the "means by which a government of a trading nation can influence the value of its currency are limited and carry with them significant risks".
"I should make the point, however, that the stance advocated by [National leader Dr Don] Brash - a stance which renounces in advance any possibility of intervention under any circumstances - is also a risky one.
"Pragmatism suggests a careful balancing of options and risks, rather than a slavish commitment to some orthodoxy."
Since November opposition MPs have baited Dr Cullen to reveal what options he was talking about or admit he had no practical way of intervening.
Yesterday National deputy finance spokesman John Key said Dr Cullen was now backtracking on his speech earlier this week.
"The examples of where Reserve Bank intervention of itself has reversed a currency's direction you could count on the hand of a man who's had his arm amputated."
The reason intervention did not work was that large funds managers in the foreign exchange markets had at their disposal amounts of money so large it would dwarf what any small trading nation could hold in reserves.
Act finance spokesman Rodney Hide said that on Tuesday Dr Cullen agreed that had no options. "Today he backtracks on his backtrack and says he has got options but they are just very costly and risky - which is of course what everybody was trying to tell him back in November."
Dr Cullen was last night unavailable for comment.
