Woodhouse Michael: General Debate 
Text is incorporated into the Bound Volume 
Woodhouse Michael: General Debate 
[Sitting date: 12 September 2012. Volume:683;Page:5148. Text is incorporated into the Bound Volume.] 
MICHAEL WOODHOUSE (National) 
: 
 One of the really difficult things the public has to do at the moment is to try to discern what Labour actually stands for. Dr Nick Smith has gone through some very excellent examples of that in the realm of education. I want to touch on this in relation to fiscal policy because there was a fascinating exchange during question time today when the Deputy Prime Minister in suggesting that Opposition parties advocate an exchange rate that was 20 percent or so lower received a barrage of interjection from Mr Mallard and Mr Goff. In fact Mr Mallard even received a withering look from the Speaker as he said something like “Don’t tell lies.” 
I am actually very interested in this because I know that Mr Parker has just been overseas and has been blogging about his trip to the US and the UK. He was meeting with some of the world’s greatest economists apparently not to listen very carefully and learn as much as he could but to discuss his ideas on monetary policy and the exchange rate—not to listen and learn but to tell the best economists in the world what he thought. He says in the blog: “He agreed”—quoting Mr Olivier Blanchard so he obviously was saying that he agreed with Mr Parker—“countries need to attend to the competitiveness of their exchange rates.” I can only infer from that that Labour and Mr Parker at least want lower exchange rates. 
More extraordinarily there is a belief which I believe is Mr Parker’s that exchange rates can be controlled for longer periods than have traditionally been acknowledged by most economists—here it is—“without losing the battle to control inflation.” So I want members to consider what a 20 percent lower exchange rate would mean for consumers. Do members know those $2 a litre petrol prices? They would go to $2.80 without any other inflationary impacts. Petrol would go straight to $2.80. What would that mean for transport? Well a lot of our freight goods are transported by road by trucks. That is the cost of goods even those we export. So our exports become less competitive even though the exchange rate is lower. In terms of imported goods—often those that form the basis of the products that we value-add and then export again—they will be 20 percent to 25 percent more expensive. The cost of home appliances all our imported electrical goods will be 20 percent to 25 percent higher. In an inflationary environment lowering the exchange rate will only add to inflation. 
I worked for a bank in the 1980s when I was giving out mortgages of 19.5 percent and 20.5 percent—runaway inflation. Nobody can remember what the exchange rate was then—nobody can remember what the exchange rate was—but they sure as heck know what their mortgage rates were. We are now paying mortgage rates of what 5.75 percent to 5.8 percent floating rates. I think the public of New Zealand are entitled to know the impact of Labour’s proposal—even if it was possible—to lever down the exchange rate. How on earth it would do that without taking one of the biggest fiscal crapshoots in world economic history is absolutely beyond me. But the public need to know what that will mean for their incomes and for the cost of living in their households and I can tell you it is extraordinarily high. 
The impact on that in jobs is anybody’s guess but one of the things that I do know is that Labour members are very good at telling half a story well. This is a Government that is firmly focused on jobs and growth. Yes there is concern when things like the Kawerau pulp and paper mill and the Tiwai Point aluminium smelter announce plans to reduce hundreds of jobs. Tiwai is fascinating. Mr Parker in the previous Parliament decried the fact that it was getting what he described as 90 percent subsidies. In fact when we softened Labour’s emissions trading scheme the subsidy if you want to call it that went from 80 percent to 90 percent. Labour members were quite happy to do it when they were in Government. That lower exchange rate might increase the value of aluminium exports—that is not clear—but it would certainly increase the costs of production. 
So yes it is concerning when those jobs go but let us talk about the growth in jobs as well. Let us talk about IBM and Unitec announcing 400 jobs; Todd Corporation and Methanex adding another 500 construction jobs for methanol manufacturing at Motunui;  
The 
Hobbit 
—we do not need to talk too much about  
The Hobbit— 
and Bathurst Resources a salve on the West Coast which is experiencing some very challenging times with Solid Energy jobs at risk. Bathurst is quietly getting on growing jobs growing exports and doing well for New Zealanders. The news is very good. It would be bad if we tried to engineer our exchange rate down.