Kiwi on its way back up soon, predicts Cullen

By RICHARD BRADDELL

WELLINGTON - The kiwi dollar has fallen further in recent days than New Zealand's economic fundamentals would justify and should rise again before too long, says Finance Minister Michael Cullen.

The kiwi dived below 50USc to a 15-month low last Friday, with the Greens' entry to Parliament cited as the catalyst.

However, Dr Cullen said any concern that the Greens' election would result in unstable Government was not justified.

While the Government would consult the Greens on matters that required legislation and issues of policy, "it is absolutely clear that we are firmly in control of fiscal and monetary policy in this country," he said.

In his first formal address as minister, Dr Cullen also announced that former trade union economist Peter Harris would join his staff to provide an alternative view to that offered by the Treasury.

While some in the markets would view Mr Harris as left-wing, Dr Cullen said, there was room for a variety of advice.

Mr Harris has observed that the impact of 15 years of restructuring had been to replace a large and unsustainable fiscal deficit and high public debt with a large and unsustainable balance-of-payments deficit and high private debt.

Dr Cullen was speaking at the Wellington launch of initiatives by global mobile communications giant Ericsson aimed at promoting New Zealand's position as internet and third-generation cellular technologies converge.

In addition to establishing a professorial chair in communications at Victoria University, Ericsson is working to facilitate development of a mobile internet industry cluster in New Zealand made up of network operators, application developers and content providers. They will be supported by a new web site unveiled by Ericsson yesterday, e-zebra.net.

Welcoming Ericsson's move as promoting the kind of partnerships that would guide New Zealand into the knowledge economy, Dr Cullen said the Government needed the cooperation of business to govern effectively and it was not arrogant enough to believe it had all the answers.

Furthermore, he said, Labour had no intention of taking unnecessary risks or moving too fast, if only because it knew that a lot of its election-night vote had been gained simply because people wanted to strengthen its hand in the coalition. Two terms were needed to cement real change.

Nevertheless, the Government was committed to making research and development expenditure eligible for full expensing in the year of investment and to accelerating the depreciation regime for new capital investment in technology.

But while the Government was also committed to doubling industry development support to $200 million, restrictions imposed by the current account deficit had to be taken into account.

A credit downgrade by Standard & Poor's was likely, he said, because the agency had been out of synch with Moody's for some time.