Businesses urged to take bank to court

Press, 26 June 1989, Page 8

Businesses urged to take bank to court

By

GLEN PERKINSON

Christchurch businesses will be encouraged to take the Government and Reserve Bank to court in what the New Labour Party leader, Mr Jim Anderton, says may be a multi-billion-dollar damages claim.

Mr Anderton says the bank has breached its act and has inflicted hardship on manufacturers and farmers. A case against' it for damages would succeed, according to advice Mr Anderton says he had received.

Mr Anderton intends to demand that Parliament forms a special committee to investigate what he alleges are breaches of the law by the Reserve Bank. If his allegations are proved correct he believes bank board members could end up being fined millions of dollars for the breaches.

Mr Anderton said yesterday that the Government was trying to “retrospectively legitimise” the bank’s “singleminded pursuit of low inflation to the exclusion of all else for the past five years,” by amending the Reserve Bank Act.

Amendments to the act, at present before Parliament, included deletion of all the bank’s primary functions except maintenance of stable price levels, he said.

The Minister of Finance, Mr Caygill, said last evening that Mr Anderton’s move was “a political stunt.” He was simply trying to publicise his economic policies which were different from the Government’s and the Reserve Bank’s.

Mr Caygill said the new act was not retrospective and would not “validate what Mr Anderton says the bank is supposed to have done.”

The bank had not breached the act and any court case against it would be based on a flimsy legal argument, said Mr Caygill.

Mr Anderton said he knew of manufacturers and farmers who may attempt a case against the bank. Canterbury farmers and manufacturers were both being hard hit by the bank’s low-inflation aims.

Mr Anderton said he would encourage people to join in bringing a test case to court.

The essence of Mr Anderton’s allegation of breaches of the act lie in the bank’s charter. It states the bank’s policies “shall be directed to the maintenance and promotion of economic and social welfare in New Zealand having regard to the desirability of promoting the highest level of production and trade and full employment and of maintaining a stable price level.” < Mr Anderton said the bank had “dumped the full employment, level of production and trade goals for its single and simple-minded pursuit of the objective of lower inflation.” “Has the bank received written instruction from the Government to do this? If it hasn’t, then it has to be concluded that it has clearly not followed its instructions from Parliament and must therefore be held accountable for what has happened.” He cites the bank’s statement of June, 1987, that "the over-riding objective of monetary policy is to lower the rate of inflation.” The bank realised that this would pressure interest rates up, reduce domestic spending and lower the value of exports. Mr Anderton said the bank had “targeted the productive sectors of the economy to bear the brunt of its lowinflation policy. It was counting on falls in output and rises in unemployment as part of the inflation-dampening interest rate effect.”

Mr Caygill said the reason for omitting all but one of the bank’s present primary functions from the new act was not to retrospectively legitimise policies of the last five years. The present act was confusing because it gave the bank too many objectives. The new act would give the bank "one single, clear, objective.” Future Governments may change or add to the objectives.