Parker David: International Finance Agreements Amendment Bill — In Committee 
Text is incorporated into the Bound Volume 
Parker David: International Finance Agreements Amendment Bill — In Committee 
[Sitting date: 19 February 2013. Volume:687;Page:7962. Text is incorporated into the Bound Volume.] 
Hon DAVID PARKER (Labour) 
: 
 The Labour Party will be supporting clause 3 of this bill which amends the International Finance Agreements Act 1961. We are not in the Labour Party selective in the advice that we take from the International Monetary Fund. I think it is appropriate at this point to record that although the current Government is giving effect to the changes that are recommended by the IMF Board of Governors to the amounts to be contributed to the IMF by different countries it seems to be rejecting advice that it is getting from the IMF on other quarters. The International Monetary Fund has moved on considerably in relation to settings that are important for an open small economy such as New Zealand’s. It has noted that countries like New Zealand are suffering the vicissitudes of changing practice around the world arising from currency manipulation and changing monetary policy settings in other countries in the world. Indeed Mr Olivier Blanchard the chief economist at the International Monetary Fund is on record as saying that countries that are performing better than New Zealand in respect of their external balance—that is their balance with the rest of the world—are using more than one instrument to target more than one objective rather than as New Zealand does which is to effectively use the official cash rate to control inflationary pressures in the economy to the exclusion of virtually everything else pursuant to legislation that requires the Reserve Bank to give primacy to the targeting of inflation ahead of other important aspects of economic management like the exchange rate. Rather than the New Zealand regime other countries are pursuing an alternative path. 
Even if the path that originally was taken by New Zealand was necessary to stamp out inflation which was so entrenched in the 1970s and early 1980s the primacy that is still given in New Zealand to targeting inflation ahead of other matters of economic management is now causing more harm than good. So although the theoretical objectives of inflation targeting were right for their day their time has passed. Even if they were right—if everyone in the world was still pursuing that same course—when other countries in the world as has been noted by the International Monetary Fund are pursuing a different course then the effects on a country like New Zealand are that we suffer the consequences of their policy until and unless we change our own. At the moment because New Zealand does not change the settings under this Government and just puts up with what we had previously we are seeing a narrowing of our export base. 
Members will recall that Bill English and the National Government at the time it was elected said that the primary objective was to rebalance the economy away from consumption towards savings in export growth. 
Dr David Clark 
: How’re we doing? 
Hon DAVID PARKER 
: Not well Dr Clark not well. New Zealand this year is predicted to have the worst current account deficit in the Western World. The National Government jumps up and says “Well the current account deficit is not as bad as it was for 2 years under the prior Labour Government”— 
John Hayes 
: Stick to the bill. 
Hon DAVID PARKER 
: I beg your pardon? 
John Hayes 
: Stick to the bill. 
Hon DAVID PARKER 
: I am actually. I am saying that the Government is a bit inconsistent in its acceptance of the help and advice that comes from the International Monetary Fund. The Government says that because the current account deficit has been higher it has somehow fixed the problem. The problem for the Government is that it has not. The current account deficit is getting worse— 
John Hayes 
: Look at unemployment. 
Hon DAVID PARKER 
: I beg your pardon? Unemployment? Unemployment has got worse as well actually. 
John Hayes 
: Why’s the exchange rate so high? 
Hon DAVID PARKER 
: The exchange rate is— 
John Hayes 
: The economy’s being managed well. 
Hon DAVID PARKER 
: The exchange rate is so high in part Mr Hayes because New Zealand refuses to react to the change in world practice where other countries are actively intervening in their economies so as to maintain a competitive exchange rate for the benefit of their exporters. New Zealand is not doing that. As a consequence we hear them say “Oh well look manufacturing is OK.” Actually manufacturing is OK in the primary sector—there are still as many litres of milk to be processed and still as many livestock to be processed—but outside of our primary sector our exporters are not thriving. Construction manufacturing is coming again in New Zealand on the back of the Christchurch rebuild but our rebalance towards exports—