Manufacturers call for sea change

New Zealand Manufacturers and Exporters Association chief executive John Walley says fiscal policy needs to focus more on trade. Photo / Supplied

The official cash rate is useless and policy is needed to focus on the importance of trade rather than the financial market, an inquiry was told today.

Opposition MPs are holding an inquiry into bank pricing after government MPs on Parliament's finance select committee voted against an official inquiry.

The MPs, from Labour, the Greens and Progressive, were concerned that changes in the Official Cash Rate (OCR) were not being passed on to bank customers.

New Zealand Manufacturers and Exporters Association chief executive John Walley said a sea change was needed given the importance of trade to the economy.

"The OCR is useless as an instrument of monetary policy. The numbers say so. In the good times it was useless in the bad times its useless."

Exporters struggled with high interest rates and a high dollar.

"The consequence is we squeeze every problem into the tradeable sector, the sector on which we depend. We shoot ourselves in the foot day in day out."

He called for changes to inflation controls that minimised the impact on the external sector, price and volume.

KiwiBank was too small to influence banking sector and should be ramped up to become a significant player, he said.

Mr Walley said the movement of capital into New Zealand should be restricted.

Other measures he suggested included control of money in circulation, variable GST, excise tax and compulsory savings.

"That again is an internal capital control. Small economies like New Zealand that is 30 per cent plus traded to the world needs to grasp this now."

Council of Trade Unions economist Bill Rosenberg said banks were charging excessive margins on floating mortgages and credit card rates.

He urged consideration of regulating international capital movements in and out of New Zealand.

- NZPA