KEY POINTS:
Politicians went on the attack over the high value of the dollar today with National blaming the Government and New Zealand First attacking the Reserve Bank.
With the dollar soaring at 22--year post-float highs and seemingly pushing on towards US80c, New Zealand First Leader Winston Peters asked for
permission to introduce a bill amending the Reserve Bank Act.
The bill would widen the Reserve Bank's primary function from price stability to include a focus on the exchange rate, the economy and employment.
The attempt was rejected, but this did not prevent Mr Peters launching into the Bank's "myopic" focus on interest rates to control inflation.
Finance Minister Michael Cullen said he was willing to look at other options, but "as long as the Governor of the Reserve Bank has essentially one arrow, it is hard to hit many targets."
Dr Cullen said there was nothing the Government could do about the exchange rate in the short term, but was continuing to work on rebalancing the economy.
Mr Peters asked whether the Reserve Bank Governor was ignoring his agreement with the Government to take into account other factors besides inflation.
Dr Cullen replied that New Zealand's Reserve Bank was in the same boat as most others around the world and concentrated on what it could do controlling price stability through interest rates.
Dr Cullen also pointed out that the Government had the power in law to suspend parts of the Reserve Bank Act if it believed events warranted it.
National's finance spokesman Bill English said Dr Cullen should take part of the blame for not pulling in Government spending.
Earlier in the day Dr Cullen told journalists said the currency was too high and investors needed to realise the risk they were exposing themselves to.
"Those people pushing money into the New Zealand dollar have to realise the correction will occur at some point and they're exposed to risk around that."
Dr Cullen did not think the dollar would immediately fall, but when it did it would probably fall back to an undervalued position.
He said the high dollar was lowering the cost of imports, further fuelling the country's spending binge on overseas goods.
The Government was moving to address long-term structural imbalances in the economy through initiatives like KiwiSaver, but a change would take time, Dr Cullen told reporters.
"This country has got to shift its behaviour over time away from consumption-led growth to savings and investment-led growth."
There was no immediate action the Government could take other than to "slash and burn" spending which he did not believe would work.
- NZPA
