Minister silent on floating dollar

Press, 15 November 1984, Page 1

Minister silent on floating dollar

PA Wellington The Government intended to keep a consistent monetary policy, said the Minister of Finance, Mr Douglas, yesterday.

Commenting on the views of the Under-Secretary of Finance, Mr de Cleene, who on Tuesday called for the floating of the New Zealand dollar, Mr Douglas said he was “not saying anything on that issue.” “Monetary policy is my responsibility and we have been pursuing a straight monetary policy and consistent monetary policy since July 14 — and we are going to continue with that,” he said. Mr Douglas acknowledged that there had been “considerable” capital inflows into New Zealand. “We increased the size of this (stock) tender to cover that and we will continue with a tight monetary policy. “What it means, of course, is that we probably will not have to borrow as a Government quite as much in the short term,” he said. Mr de Cleene had urged a

floating exchange rate because “I don’t think you can have continued devaluation and possibilities of revaluation, and play around with uncertainty. “The reservation I have is that New Zealand is a very small economy which can be manipulated by big-cor-porations and countries. “But on balance, I come down to the view that we are having, in my personal view, this (a floating exchange rate) thrust on us by the inflow of capital ” A Reserve Bank spokesman said yesterday that after a net outflow in September, there had been an overseas exchange inflow which had developed in October and this month. It appeared the inflow was created by New Zealand’s interest rates which made investment attractive to foreigners. The leader of the New Zealand Party, and its finance spokesman, Mr Bob

Jones, said that if the Government did not float it would lose the benefits of the 20 per cent devaluation > and be left only with the disadvantages. Mr Jones said a float would be some recompense to the agricultural industries for the forfeiture of their subsidies. A unionist and economist, Mr Rob Campbell, said the idea that the New Zealand economy could sustain a floating exchange rate, when it was such a small and vulnerable economy, should be laughable. Mr Campbell, secretary of the Distribution Unions, said, “The only gainers would be the financial institutions which profit from erratic money flows and the need to hedge against them for traders.” Mr Douglas should state clearly that New Zealand would not abdicate its right to manage its own economy, Mr Campbell said.