Intervention to force N.Z. dollar down ruled out

Press, 2 May 1988, Page 8

Intervention to force N.Z. dollar down ruled out

By TOM BRIDGMAN NZPA correspondent Los Angeles The Prime Minister, Mr Lange, has ruled out any exchange-rate intervention to lower the value ofthe New Zealand dollar. He told business leaders in Los Angeles that the New Zealand stockmarket has gained a reputation as the “haunt of the last of the cowboys of the sharemarket world” and that “creative accounting” by some had not enhanced New Zealand’s international image.

With the United States dollar declining and the New Zealand dollar now worth more than US67 cents, Mr Lange acknow-

ledged there was pressure from farmers, manufacturers and exporters to bring it down. “We are constantly being invited to intervene to influence or direct downwards the rate of the exchange of the New Zealand dollar,” he told a social gathering yesterday of people with New Zealand business interests.

“There is a superficial attraction in that and if you look at the short-term results of public opinion polls you might be tempted to do it. “But if you look at the reality of what it means you cannot possibly do that because there would be ... a return to inflationary pressure.”

Mr Lange said manipulating the exchange rate down would reinforce inflationary expectation and drive up interest rates and costs. “You would be back in the same downward spiral that we experienced ever since. Britain entered the Common Market,” he said.

He predicted a change in the exchange rate over the next three years and encouraged the New Zealanders engaged in selling in the United States to “keep at it.”

New Zealand’s “quite intolerable levels of public debt” were being paid off through asset sales and other Government

measures. Mr Lange hinted that figures due out this week would, as predicted, show a surplus in the Government account. “For the first time in 30 years we will have repaid some foreign debt,” he said. As for the stockmarket crash last October, Mr Lange said it had been more dramatic in New Zealand where its effect lasted longer than in any other Western stock market. He said the “wide-eyed boys” with the Lear jets had “shot through” and the planes repossessed.

“We are now back in the constructive stages of rebuilding our economy.”