Cullen's options fade as kiwi keeps rising

By KEVIN TAYLOR political reporter

Comments by Finance Minister Michael Cullen appearing to suggest he has no options available to curb the currency's rise against the United States dollar have been seized on by opposition MPs.

National Party deputy finance spokesman John Key said yesterday that Dr Cullen was waving the "white flag of defeat" during a speech this week, despite his comment last year that the Government was not without options when it came to controlling the New Zealand dollar's climb.

In November Dr Cullen told Parliament's finance and expenditure committee the Government did not regard itself as "entirely without options" over the value of the dollar.

Since then opposition MPs have baited him to reveal the options or admit he has no practical way of intervening.

On Tuesday Dr Cullen told a wine exporters forum two key factors were driving the kiwi's rise against the US dollar - the general weakness of the US dollar and the "out performance" of the New Zealand economy.

"Much as I might wish otherwise, there is nothing I can do to alleviate the perception of current sluggishness in the US economy," he said.

"I think the essential discipline for the medium to long term is to maintain a focus on what will create sustainable international competitiveness for New Zealand businesses."

Mr Key, a former global head of foreign exchange for investment bank Merrill Lynch, said the comments were a sign Dr Cullen was defeated.

Despite talks with officials, no option was palatable or practical, Mr Key said.

Chief Ombudsman John Belgrave told Mr Key in a letter this week he provisionally backed Dr Cullen's refusal to release officials' advice on possible options under the Official Information Act.

Mr Key said the kiwi was buying US61c when Dr Cullen made his comment in early November. Since then it had risen 10 per cent against the greenback.

"I think he gave exporters a false hope that he was going to ride in on the white horse and save them, when the reality was he always knew he wasn't going to."

Dr Cullen's spokeswoman said yesterday that he did not have any comment.

Act finance spokesman Rodney Hide said he did not believe taxpayers would have wanted Dr Cullen to intervene in the currency markets.

"Back in November Michael Cullen said he was not without options. He refused to tell the public what these options were.

"Now he's thrown up his hands and says that there's nothing he can do."

Mr Hide said there was a lot Dr Cullen could do to help exporting businesses by dumping the Employment Relations Law Reform Bill and announcing a timetable to cut red tape.

Curbing the rising NZ dollar

"There are no effective policy instruments to address that because New Zealand is an open economy with a free-floating exchange rate." - Finance Minister Michael Cullen in an interview with the Economist in late September.

"The Government doesn't regard itself as entirely without options in this respect, but those options have to be dealt with very carefully indeed." - Dr Cullen at the finance and expenditure committee, November 5.

"Much as I might wish otherwise, there is nothing I can do to alleviate the perception of current sluggishness in the US economy." - Dr Cullen speaking to wine exporters on Tuesday.