KEY POINTS:
Here is aan earlier selection of Your Views:
Sasha
If Cullen and the Labour party had any sense at all, then they would look at what happens in Hong Kong with their currency or tie our dollar to the US currency, to stop all these fluctuations, it would also stablise the dollar for exporters, stop the money profiteering from speculators and put this country on a more even keel, for everyone.As for Bollard at the Reserve Bank, all he seems to know is to put up interest rates, Reason to stop spending, Well what a joke, if he had bought the interest rates down, that would have sent a strong message to the speculators and they would have moved offshore.The only people this guy is hurting is those who can afford it the least. Very narrow minded. Take a look at Australia and learn something.
Home Owner
I agree with the view os "Enron". I personally believe that all these economists employed by the banks are paid to provide their views. If my memory goes right before the last rate hike almost 75 per cent of these economist had predicted that RBI will not rise interest rates and they were all proved wrong.I reckon they are just puppets of the banks they represent and are just saying what they are told to. Over the last 3 years they have been proved wrong on many occasions. Please do not listen or believe what they say, please verify the facts, they surely have their own interest at stake.And as regards the RBI and Cullen's authority they have no say, because the currency is controlled by overseas investors who have heaps of money to speculate, when RBI intervened last time the Kiwi dollar went up the following day and since than has increase by almost 5 cents. What a joke.
John (Wellington)
It no wonder Bill English didn't win the election. It's the job of all politicians to support exporters and homeowners, that's why Dr Cullen needs to exercise his powers to bring the exchange rate back to it's fair value and keep interest rates realistic. English has once again, got his priorities mixed up. He puts his own own raging political ambitions before the welfare of the country.
A.Fourie
Cullen knows what he is doing, he should be trusted to deal with this crises as with any before over the last few years. Stop the politicking of this very important issue, put heads together and find a solution instead of trying to be an obstacle such as NP is doing at the moment. It is not to our or their benefit. News reporters should also try to give a clear picture of facts rather than stirring up emotional responses.
David (Canterbury)
Are we on a death spiral, you betya. As an arable farmer exporting product all over the world, believe me, this outrageously high dollar is killing the productive sector. I find views such as "Rick" on page two breathtaking. To view exporters as minority and importers and spenders as the majority sums up this nation's problem. Where does Rick and others think our nation's wealth comes from? At present NZer's spend 115 per cent of our annual incomes, we go to big box stores to buy inferior quality imported products on credit, we buy second hand Jap imports on a dollar down and a dollar a day and then borrow 95 per cent on homes. We then seem surprised when interest rates go up, the NZ soars, manufacturers go broke and shift production to China. Wait for the crash fellas, discretionary expenditure in our business has stopped. Sure there will be a lag before it bites you all in Auckland, but remember the export sector drives NZ wealth.
Nelson (Auckland)
Absolutely no!
Politicians should leave the RB alone.Real problem is at the Housing Ministry, not the RB.
Kiwimike
Strong New Zealand equal Strong Currency without fluctuations. Peg it to the Euro and close to its current value. In time the local economy will adjust and go away with economic swings. Some industries will disappear and other will flourish. Speculators will likely leave in droves.
Robert Leivers
Govt.invoke powers? I can only suggest with all this press coverage that Dr Cullen is throwing all sorts of ideas into the public domain just to get a reaction, presumably because of some lack of confidence in what strategy to follow next ? Invoking special powers, warning forex investors/gamblers about the risk factor, hinting at further OCR rises, and so on. Sounds like a worrying situation when you get to this point with no real solutions left.Steve Hanke (USA) expresses his concerns correctly but seems to have overlooked the lessons of the UK when we linked to a European basket of currencies/fixes back in the 90s through the ERM, and forex marketeers forced us out (Black Wednesday) and helped to put our own bank rate up several points in one day to exceptional highs of 15 per cent. We all have our own solutions, but what is clear is that delays, lack of clarity in planning, and continual debate over such solutions (your inflation problems started back in 2003/4 !), are your worst enemies in this drawn out saga over the OCR and other options.
edenz
The NZD is our currency. each and every NZD investor is at our mercy as to where we wish to set the value. The solution is simple. Reverse the process. If the Japanese housewives and Belgian dentists are so enamoured with the NZD let us give them all they desire. Set up a crown investment agency to issue 5000 trillion nzd bonds in the market and use the proceeds to invest in substantial stakes in Toyota, Sony, Panasonic, Caterpillar, Boeing etc. or alternatively leveraged buyouts of these firms.The returns can be utilised to pay national superannuation for all kiwis in the years ahead. Consider it a head start for all of us. If these foreigners have no consideration for the health of our economy, why should we be concerned if they should loose money investing in NZD. What's the worse that can happen ? At most, the crown agency defaults on its debt issuance. so what, international investors have short memories, look at South American sovereign bonds which have defaulted in the past. These same investors are still investing there.
NZ should give these investors what they want and thank them for their generousity.
Antoninus-7
'Extraordinary Powers', tho' - that's a good one, isn't it...?There was a time in the History of European Culture when usury was considered unethical.
Venkat
i strongly opine the government should not interfere with the action taken by the governor of reserve bank. While the governor wants to contain inflation by economic means government wants achieve it by political means. At the end of the day it is the economic measures that is going to help the community at large than the political interference. By interfering the government only sends message to everyone hi look here. "At the end of the day it is we who decide and not the professionals".
Lal Perera
I quite agree with John Selby. Since New Zealand is an OECD member, naturally currency speculations bring an avalanche of money here to earn high interest. Why Japanese investors give away at 1.5 per cent on their own soil, when they can earn a cool 8 per cent in a very stable economy? Cullen and Bollard duo's stupid solution to house prices is going to be ruining the entire New Zealand economy. Your ludicrous high interest solution will never bring house prices down, but push everybody to live under motorway bridges. Has it over the last two years even with your 'magic' fix? Grow up men just release more land for houses. Stop killing the economy and its people! How can you run a Treasury when you cannot understand a simple supply demand theory?
Andrew Morten
When interest rates are so high just to stop a property boom, surely the best thing to do is target the issue. Instead using interest rates as a means to cool the housing market just slows the economy, raises the dollar to slow export markets and tourism. But then an embattled government is hardly likely to take on big issues that matter such as Capital Gains Tax on investment properties. Instead they will mess with the Reserve Bank and take us back to the Muldoon era (error).
Kelvyn Alp
The political posturing by politicians will not solve the monetary problems this country faces. Once people realise the "real" reason why this country is in such a predicament, it will become abundantly clear that both Bollard and Cullen are merely pawns (willing or otherwise) in one of the greatest scams hoisted upon this and many other countries. Let us look at a quick breakdown of last year's figures for example: NZ Currency in circulation $3.402 Billion - NZ Currency held by banks $591 Million - Money owed by the public to banks $219.805 Billion - Government Debt over $35 Billion - Net foreign currency liabilities of the banks $46.102 Billion. The fact is, the NZ government is suffering irredeemable debt! It is that simple. Now anyone that can put 2 and 2 together will realise the figures add up to a major "uh oh". This is why the Direct Democracy Party DDP has made its submission to the 'Finance and Expenditure Committee on Monetary Reform'. Let us hope we get the chance to be heard finally!
Johnny (Lower Hutt)
Show me a caring capitalist and I'll show you a vegetarian wolf.
Najirb
I'm not a fan of Dr. Cullen as I think he is too slow to act, although in this case I think he is right. It gives the market fair warning that a continually rising dollar may be more problematic than inflation and therefore the government has it in its power, the ability to change emphasis. His next move should be to instruct the RBNZ to lower interest rates by 0.25 per cent thereby shocking the speculators out of driving the dollar up. If he does not follow through, the speculators will push the kiwi even higher, determining that Cullen is, as usual, just full of hot air!
Chris
The exchange rate is a real issue to NZ export, but there is a simple solution. Adopt the Euro as the standard of international exchange. The NZ dollar doesn't tend to fluctuate so wildly against the Euro, so it would give both exporters and importers more certainty. We're paying the price of a low US dollar through no fault of our own, so it might be time to ditch it in favour of something more stable for international trade.
Auckland
A floating exchange rate means just that. The wider market, and not tinkerers, sets its value based on all factors, local and international. Do we really want to go back to the Muldoon era when we never knew what intervention with what unpredictable consequences might come out of the blue next? If the whole purpose of continually raising interest rates and as a consequence driving up the dollar is to bring the housing market to heel, there are other ways to achieve this, by limiting ownership of our residential housing stock by foreign investors for one, and limiting banks' ability to lend on 100 per cent for another. If exporters really can't compete without intervention to drive down the dollar, then they're not as good as Aussie exporters, who have to constantly live with a dollar around ten per cent higher than ours. And I know the US is a more self sufficient economy than NZ, but poor old US exporters have to live with a dollar that's always worth a buck!
KiwiJohn
From Cato's website (www.cato.org) and just to clarify...
Cato's Mission: "The Cato Institute seeks to broaden the parameters of public policy debate to allow consideration of the traditional American principles of limited government, individual liberty, free markets and peace. Toward that goal, the Institute strives to achieve greater involvement of the intelligent, concerned lay public in questions of policy and the proper role of government."
So is the emerging real debate around our Monetary Policy emanating from fundamental differences between radical socialist and free market thinking or between communism and democracy?
Earl Mardle
Hanke has no credibility, firstly from his association with Cato and secondly his recommendation that we hook the NZD to the plummeting USD.NZ should look again at the transaction tax, especially for foreign exchange transactions; one big enough to deter speculators but not those with valid reasons to transfer funds. That would also inlcude me as I transfer the proceeds of my house sale in Sydney to NZ so I have skin in this game.Malaysia clamped down on currency speculation a few years ago under dire threats that its economy would implode and the result has been trivial, fear of the likes of Mr Hanke is a huge part of the problem.And in the meantime can the media get off this idiotic meme that the NZD is "soaring"? It is holding formation with most of the world's currencies, the change is the collapse of the USD and the government as a whole needs to be strategising for what to do when it finally goes off the cliff.
Bren
I like most NZrs work to live, not live to work, if this circus Labour govt pokes around in Bollards pie, I can only see us doing the later, living to work. We need new vision, the olden day Labour cronnies glasses are fogged, bring in National.
Matthew
Russell - Just so you know the banks are not making a killing out of the high interest rates. The rates that they charged are based around the OCR - the government lends money to banks slightly higher than the OCR and will hold their money at a slightly lower rate. Thus the banks are only making profit on this difference - the government gets pretty much whatever the OCR is less that margin.
john selby
Does Bollard want to send NZ broke? This strategy of raising interest rates is simply not working and is just creating a feeding frenzy for international speculators and carry trades. Every time the rates increase they rub their hands with joy and buy more NZ Dollars which in turn pushes the currency higher.Its simply like a dog chasing its Tail. NZ needs to wake up quickly before its too late.Our interest rates are already unrealistically high compared to the rest of the world so no wonder the speculators are having a field day at the expense of NZ exporters and home owners. We urgently need a bit more vision and change of plan so that interest rates start declining and fall in to line with our major trading partners.
MS (Auckland)
The extent to which the majority of these responses are wide of the mark is breath-taking. Interest rates need to keep on rising to curb consumers' spending and debt-accumulating habits. NZers spend $1.15 for every dollar they earn and the Japanese and other offshore investors are merely responding to this demand for credit. Where else is the funding for this excess going to come from? How do you curb this demand? By putting up interest rates of course.
Sobandith Pan
Although New Zealand wants to switch to the fixed exchange rate regime to tackle the exchange rate problem but it may not have adequate amount of the foreign reserve to do so effectively.Further more, New Zealand does not have huge net export surplus like China does, which generates adequate amount of the foreign reserve that enables it to peg the exchange rate. My concern is that pegging the exchange rate may not be the long term solution for the problem we are facing now.
KiwiJohn
The continued public reaction by the Banks to any news item that even dares to mention an alternative to hiking the OCR is a clear sign that the banks themselves stand to loose significant turnover and profits unless they succeed in maintaining the status quo of monetary policy in New Zealand. Perhaps the NZ Herald and other media should stop referring to these people as an economist - just call them what they are: Commercial Representative.
Hyperborean
Why should the Government have to 'invoke extraordinary powers' to [effectively ] do its job and 'govern'? Would it perhaps be because the privately owned & controlled* banks are the government [ in reality ]. The 'economy' is as much an illusion as the so-called 'democracy' that depends on it.Sometimes, I find it very difficult indeed to retain any compassion towards the unthinking majority & I guess they do too.
Michael
The Cato Institute is not a neutral commentator, and their comments about a number of issues are clearly infused with (sometimes quite extreme) right wing philosophy. You can't report that as news, without discussing that organisation's reputation.
Dr Powell (economist)
The gentleman Steve Hanke, at Baltimore's Johns Hopkins University is sadly mistaken and is talking poppycock if he thinks NZ should peg the currency. Everyone gives their 15 minutes of fame. What if a major oil field was discovered in NZ. The exchange rate would soar. You cannot curb to peg the exchange rate. Many countries have been down that path and been financially ruined as their Reserve banks have tried to prop up their currency in a futile attempt to peg the currency. England was a classic example that lost 1.5 billions to George Soros. The British taxpayer paid for that folly. Another was Thailand and many other countries that try to peg the currency and blame evil speculators for their woes. Many countries were financially ruined. Russia try it in the late 90's and was virtually bankrupt. We must not listen to such rubbish. The currency must be allowed to float. The Reserve bank of NZ must not interfere not should Cullen who is trying to get re-elected try talk down the currency. Many politicians have try and failed in that approached and only excaborated things further.
Charles
I am an importer and yet I am very concerned about the high NZ dollar. It is no use having cheap imports if your customers are going out of business. I thought our company would be out the back door when the NZ$ was at 38 cents but the farmers had so much money they were able to purchase product with ease.
Keep the exporters happy and the economy will be fine. Free up the housing market (land and council compliance) and reduce the cost of housing. Reduce the interest rates and send the Japanese back home. If Cullen doesn't act soon, history will be very unkind to him!
Enron
So, ANZ's chief economist is urging government to do nothing and for the RB to continue its inflation focus.What local banks fear most is rapid depreciation of the NZD because they all have hard-currency debt which they must service. Ditto the Government itself. The foreign lenders fear that when the NZD collapses (it will, one way or another) borrowers will not be unable to service their hard-currency loans.Don't trust anything said by the banks' economists or any of the commentators or spokesmen with a vested interest.Learn from history. In 1997 in Thailand, when the Thai Baht was under pressure, there was a chorus of reassurance from the overseas banks (lenders) and local banks (borrowers) that the Baht exchange rate was sound and that the (Thai) Government could and would defend its position. Only later, after the collapse, did we hear of the huge exposure the banks had and the losses they suffered as a result of the collapse of the Baht. Only then did we understand why the banks' economists and the various commentators in their employ tried to talk the Baht up with such enthusiasm and convincing intellectual sincerity. In the meantime, those same banks (and individuals in the know) were bailing out of the Baht as quickly as possible. In the case of Thailand the collapse was so rapid that the banks couldn't move fast enough and just about all of them were burnt badly.OK, the situation in NZ today is not identical but one lesson is clear: at a time like this, don't take anything the commentators or "experts" say at face value. Check if they have a vested interest.
Bill
Hey JT - In a capitalist economy people do go out of business and people do lose their homes. That is the nature of the beast. The vast majority of people in this country want a capitalist economy. Therefore when it turns around and bites on the bum,them as it is now, why all the bleating. It sounds as though you want to go back to the old days of privitising the profits but socialising the losses.
Fred Kingery
Mr. Cullen's attempt at intervention into Reserve Bank (RBNZ) policy is a really really stupid idea. He is playing to the politics of the situation only. The exporters are vocal but no one seems to comment on the value that the high dollar represents for every citizen of NZ. What is the import bill? What is purchased with this high dollar ?? Anything and everything that is imported into NZ for all to comsume is cheaper with the high dollar. Has anyone done the math ? What is the value added here for all compared to the opportnity lost for the few exporters compared to the many many consummers. A rising , strong dollar adds wealth to NZ in the form of increased purchasing power. It's not a bad thing, it is a good thing. The commodity base of the economy is benefiting from higher export prices that more than off set the negative effect of the higher dollar. It seems to me that any attempt to undermine to prestine global view that New Zealand has an independent central bank that functions on objectivity rather than the politics of situation is worth more than anything the expident effort by Mr. Cullen might achieve. To tarnish the view the rest of the world holds that RBNZ is objective and independent for the benefit of an openly vocal minority is dumb, stupid, and just plain nuts.
Matthew Pilott
Duncan claims the situation is because Cullen has done something that is incorrect. If anything, Cullen's actions have not been forceful enough due to market conditions, as opposed to being wrong - I believe it is time to act.
What he is looking at doing is changing the goalpost for the RB. Current target is inflation, but it's likely that interest rates and exchange rates are doing more damage than having inflation over three per cent. Cullen's therefore pretty onto it, suggesting a shift in RB activity. But maybe he should ask Duncan first, seems there's something he knows that Cullen doesn't.
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