Published today in the press:
New Zealand's high dollar is a vote of confidence in the country's economy, and there is no silver bullet to bring it down for exporters, Finance Minister Bill English says.
The kiwi dollar was trading against the US yesterday at around 76c.
"The dollar is one way the market is telling us Australia and New Zealand have performing economies, because relatively speaking we are," Mr English told Canterbury business leaders yesterday.
Taking a five-year average, the New Zealand dollar was the highest it had been since the 1960s so concerns about the dollar did have some historical basis, Mr English said. "What can we do about this? In many respects not much. We've just got to make sure we've got the story clear."
Mr English said the dollar was high compared with the US and the British pound, but was not high relative to the Australian dollar and Australia was still New Zealand's biggest export market.
"One of the reasons that we are high against the UK and the US is because frankly they are in a bit of a mess."
New Zealand's economy had not shrunk by as much as Britain, US and Europe.
Another driver of the high dollar was low interest rates in other countries, Mr English said.
Interest rates in the US, Japan and the UK were either zero or low, so when investors were offered a triple A-rated New Zealand Government bond at 5.5 percent interest, it was attractive to them compared with the alternative.
New Zealand was now attracting interest from people who were wanting to diversify away from US dollars to buy New Zealand debt or the New Zealand dollar, he said.
Those things were out of the Government's control. "If there was a silver bullet to do with the dollar then we would fire it, but there is not one." The high New Zealand dollar was one of the reasons the export sector had shrunk in the last decade, he said.
New Zealand's economy had an imbalance between the tradeable and non-tradeable sectors. In the last five years the tradeable sector had shrunk by 10 percent and the non-tradeable sector had grown by 15 percent. The biggest driver of that growth was government spending. Growth in the future would not come from a fast-growing government or fast-growing credit, it had to come from the tradeable sector.
"It's (the tradeable sector) up on blocks and someone has taken the wheels."
Mr English also said countries all around the world were going to increase taxes but one country that would not was Australia, which was competing directly for New Zealand's companies and its people.
"We can not afford to raise taxes if they do not," he said.
I will post later on today as to why, but we need more of this thinking!!