High dollar tough, says Key, but intervention won't work

Prime Minister John Key. File photo / Mark Mitchell

Prime Minister John Key has acknowledged the high currency is tough for exporters, but said intervention by the Reserve Bank was unlikely to be successful because it had not worked overseas and the New Zealand economy continued to be seen as more attractive than the US economy.

He said he did not want to risk taxpayers' money on intervention when there was no certainty of success.

Markets continued to re-rate the US economy, making New Zealand relatively more attractive, he said.

Speaking on TV3's Firstline this morning, Key said any decision on intervention was ultimately a matter for the Reserve Bank.

"But I think you need to appreciate that what's happening here is a re-rating of the US economy and the various instruments that reflect the health and well-being of the US economy," Key said.

"Essentially the financial markets are saying that, on a relative basis, New Zealand is a better bet than the United States at the moment. That reflects their very sluggish growth, their very high levels of unemployment and of course the massive debt that they have," he said.

"So on the backdrop of that, if the Reserve Bank was to intervene, you'd have to say up until this point anyway at least, that would have been very unsuccessful, and [there] may not be a lot of reasons to believe it would be successful in the future."

"So while we appreciate all the things exporters are going through, the pressures that the high exchange rate puts on them, I think it's a matter of making sure that we don't just waste taxpayers money by going out there and punting on the exchange rate and getting it wrong," Key said.

"The reality is if you look around the world at countries that have invoked heavy intervention programmes, they've been spectacularly unsuccessful," he said.

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