Dollar fall predictable, says Mr Birch

Press, 18 December 1985, Page 9

Dollar fall predictable, says Mr Birch

PA Wellington The sharp fall in the New Zealand dollar was predictable and necessary for exporters to survive, said the Opposition spokesman on finance, Mr Bill Birch, yesterday. He predicted the dollar was likely to fall to about its March level of 44 U.S. cents.

“At that level, it will restore viability to the export industries that have been threatened with virtual collapse over the last six months,” Mr Birch said. “The unduly high value of

the New Zealand dollar over the last six months has been a direct result of the high interest rate policy pursued by the Labour Government.

“The cost of the high interest policy has been a rapid decline in investment and economic growth.”

Mr Birch said fluctuations in the exchange rate had created uncertainty for business investment. Some businesses would gain substantially by the fall in the dollar, particularly when they had invested offshore.

Others, which had borrowed offshore to avoid the high interest rates and had not covered the exchange risk, would lose substantially.

Mr Birch said big imbalances in the economy remained and he predicted an inflation rate of 20 per cent for the end of next year. “The wage settlements, the devaluation of the dollar and the goods and services tax, together with the underlying inflationary forces, are likely to push inflation over 20 per cent by the end of 1986,” he said.