Kiwibank has increased its interest rates just as the Labour party gears up to reveal its proposed changes to monetary policy this morning.

The party's deputy leader and finance spokesman, David Parker, says New Zealanders paying off mortgages will be better off if Labour gets to implement its plans to change the way interest rates are set.

Kiwibank has raised its floating rate from 5.9 per cent to 6.15 per cent in response to an increase in the Official Cash Rate last week.

Until recently, both major political parties were in agreement that the current framework under which the Reserve Bank has a primary focus on controlling inflation was the best approach.


But Labour, NZ First and the Greens now argue the focus on inflation is hurting exports and jobs by driving up the exchange rate, making New Zealand goods and services less competitive.

Ahead of Mr Parker's speech this morning, Prime Minister John Key was already on the attack, saying "the consensus view is New Zealand has world's best practice" when it came to monetary policy and any improvement offered by Labour was "snake oil and you really shouldn't buy it".

He said Labour's policy was "probably a mortgage levy but that was something the previous Government back in 2007 looked at and rejected".

But Mr Parker last night ruled out a mortgage levy - a tool which would increase mortgage costs for borrowers when the economy was booming but potentially reduce them during harder times.

The policy he would announce this morning would not increase costs for home buyers he said.

"They'll be pleased because what we're doing will take pressure off interest rates, ie, have lower interest rates and improve the economyso we've got better, well-paidjobs.

"With this we'll have less pressure on interest rates and we'll be heading towards a more realistic currency with more jobs and export earnings."

He said the policy did mark a departure from the previous consensus but inflation targeting would remain a key priority and the Reserve Bank's independence would be maintained "but we will be making significant changes".

He said the policy would not be regarded as radical.

"I think it will be viewed by people as sophisticated and appropriate."