KEY POINTS:
Winston Peters has stoked up the row over rocketing interest rates and the Government says National's policies would push them even higher.
As the fallout over yesterday's Official Cash Rate (OCR) rise to a record 8 per cent continued to cascade over politicians, Mr Peters described the situation
as a catastrophe.
The New Zealand First leader told a Grey Power meeting in Palmerston North today the high value of the New Zealand dollar -- a result of the interest rate level -- was pricing exporters out of the market and killing the country's growth potential.
Mr Peters said Labour and National were responding with empty words and no action.
"If there ever was an issue crying out for someone to 'just do it' -- this is it," he said.
A spokesman for Finance Minister Michael Cullen acknowledged there was a problem.
"That's why there is a select committee inquiry underway," the spokesman told NZPA.
"As (Reserve Bank governor) Dr Alan Bollard said, there is no silver bullet. He also said the core of this issue was New Zealanders' appetite for debt and that is clearly where some of the solutions might lie."
National's leader, John Key, stepped into the conflict and said the interest hike had been unnecessary.
He said Dr Bollard had not given previous rises enough time to impact on the housing market or consumer spending.
"He could have given it some time to flow through because ... certain parts of the business community and the housing and private sector consumption areas are increasingly becoming much weaker," Mr Key said.
"It's in a sense a game of chicken with the New Zealand housing market and one that he intends to win ... he will continue to raise interest rates until the housing market stops in its tracks."
After Dr Bollard's announcement yesterday the dollar rose to a new high of US75.6c, and Mr Key said he expected it to go as high as US80c.
Finance Minister Michael Cullen said Mr Key was not offering any policies to take pressure off the dollar.
"Perhaps he should stick to being a money market speculator rather than cut across Mr English's attempts to be more fiscally conservative," Dr Cullen said.
He has been saying for several weeks that Mr Key and National's finance spokesman Bill English are at odds over economic policy.
Dr Cullen said Mr English had made it clear National would be looking for half a billion dollars a year in spending cuts while Mr Key was pushing tax cut proposals which would have an initial full year effect of $2.5 billion.
"It is quite clear the overall position of a National government would be more fiscally stimulatory than this government," Dr Cullen said.
"If National were in government today, its tax cutting, borrow and hope policies would put more pressure on the Reserve Bank to raise interest rates higher, pushing the dollar up further."
- NZPA