Plea for action to help farm exporters

NZ First list MP Fletcher Tabuteau has said the Government should change monetary policy to protect farming exports from a high-value dollar.

A Rotorua-based NZ First list MP has echoed his party leader's call for the Government to protect farming export interests by taking greater control over the high-value dollar.

In comments made to The Land, Fletcher Tabuteau said the Reserve Bank Act should be reformed to give the Bank's governor more flexibility when setting the Official Cash Rate (OCR).

Outspoken NZ First leader Winston Peters had previously said the National Government should "get off its backside" and help struggling dairy farmers by changing the Act.

Global dairy prices fell to a five-year low last week, with whole milk powder now valued at US$2386 a tonne. Last month, Fonterra revised its forecast for this season's farmgate milk price payout downwards from $4.70/kg to $4.50/kg.

Mr Tabuteau said exports were the "engine room" of the New Zealand economy, and suggested current monetary legislation was too narrowly defined to provide enough protection for primary industries.

"The farmers represent a significant and important sector of the New Zealand export market ... [Mr Peters'] statements are focused around ensuring that the Reserve Bank look at more than inflation when it comes to setting the Official Cash Rate," Mr Tabuteau said.

"The Reserve Bank Act's current legislative setting is nearly 30 years old. New Zealand First is insistent that the Government modernise the legislation so the Reserve Bank governor can take employment levels, growth and our export sector into consideration when the Official Cash Rate is set."

The OCR is the interest rate set by the Reserve Bank to manage inflation, which can impact on the dollar's value.

He saw a forecasted cut in the OCR as helpful for farmers and other exporters, but he said the bank would base its decision on external factors, such as a slowing Chinese economy, rather than what was best for farmers.

"This possible upcoming change is more coincidentally good for our export market, rather than a deliberate action given its importance for our economy," Mr Tabuteau said.

National MP for Rotorua Todd McClay dismissed NZ First suggestions of increased currency intervention, invoking the memory of an infamous figure in his own party.

"The last person to try to control the dollar through legislation as NZ First have suggested was Robert Muldoon, to disastrous economic consequences."

Mr McClay said the Kiwi economy was faring well, and insisted excessive tinkering with monetary policy would jeopardise any sustained growth. "We have strong economic growth of 3.5 per cent, and 74,000 more jobs were created in the last 12 months.

"These strong economic conditions are in part because we have low inflation and low interest rates."

Yesterday, Reserve Bank governor Graeme Wheeler, speaking to Parliament's finance and expenditure select committee, said New Zealand's high currency value was "unjustified and unsustainable," and hinted at the need for greater intervention.