Parker David: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeParker David: Questions for Oral Answer — Questions to Ministers[Sitting date: 16 April 2013. Volume:689;Page:9346. Text is incorporated into the Bound Volume.]5.Hon DAVID PARKER (Labour) to theMinister of Finance: Will the recent rise in the New Zealand dollar to a post-float high on the Trade Weighted Index cause job losses among non-primary exporters and import substitution businesses?Hon BILL ENGLISH (Minister of Finance): It is too simplistic to conclude that although of course it is possible. Jobs come and go for all sorts of reasons including winning or losing customers the success or failure of competitors and changes in market prices which can of course be influenced by the exchange rate. A high exchange rate does make it more difficult for exporters to be profitable but it is clear that over the past 6 years or 7 years despite a rising and high exchange rate many New Zealand exporters have remained or became profitable and are growing. This is demonstrated in for instance the Performance of Manufacturing Index for the manufacturing sector which has shown that since 2009 the manufacturing sector has been growing most of the time. More recent statistics suggest that our firms are fairly resilient. New job listings on seek.co.nz are up 4.9 percent compared with March lastyear and TradeMe reports job vacancies in the first quarter were up 5 percent on a year ago.Hon David Parker: Does he agree with the IMF and the Governor of the Reserve Bank that the New Zealand dollar is overvalued and hindering the rebalancing of the New Zealand economy; if so what measures will he take to reduce the level and volatility of the New Zealand dollar?Hon BILL ENGLISH: Yes I do tend to agree with the Reserve Bank and the IMF on this matter and I also agree with both of them that there is no easy or obvious fix to a relatively high exchange rate. That high exchange rate is driven by the relative health of the New Zealand economy compared with other developed economies. I would expect the exchange rate is likely to come down when other economies stop printing money and their interest rates start rising. In the meantime we are focusing on what we can control which is the competitiveness of the New Zealand economy and our 300 initiatives in that respect are set out in the Business Growth Agenda.Hon David Parker: Given that exports have barely moved as a percentage of GDP in the period since he was appointed how will his goal of exports at 40 percent of GDP be achieved under what he himself has called the highest rolling average exchange rate since World War II?Hon BILL ENGLISH: Well under the circumstances we actually have not done too badly. I agree that the high exchange rate is a headwind to a rebalancing of the economy. The other significant headwind is going to be the rebuild of Christchurch where very substantial resources that may have been invested in the externally focused sectors are going to be invested in rebuilding Christchurch but that is something that we have to do. In the long run our focus on getting the Government’s books under control improving the efficiency of the 30 percent of the economy the Government controls and focusing on the competitiveness of our businesses compared with offshore including Australia is going to lead to an improvement in our export performance.Paul Goldsmith: What reports has he received showing that businesses are becoming more confident and investing for growth despite the headwinds caused by the high New Zealand dollar?Hon BILL ENGLISH: There are a number of such reports that show the resilience of New Zealand businesses which recognise that an increase in the exchange rate is effectively an increase in the living standards of most New Zealanders. Those reports include the New Zealand Institute of Economic Research’s quarterly survey of business opinion which shows business optimism at the highest level since March 2010; the latest monthly economic indicators show that the outlook for the economy is looking more positive; and the BNZ - Business New Zealand performance of manufacturing index remained positive in March and just off a 12-month high. Of course if the exchange rate remained at elevated levels of 86c or 87c against the US dollar that would be a very significant challenge for New Zealand businesses.Hon David Parker: Given that just last week he said that the two biggest hindrances to export growth are the Canterbury earthquakes and the exchange rate should he not abandon the primacy given to inflation targeting over other aspects like the exchange rate and do something to address the exchange rate in order to increase exports?Hon BILL ENGLISH: Well I would certainly stand by those comments. If the member means are we going to go printing money the answer is no because in the long run that will drive down the living standards of all New Zealanders. Bear in mind a rising exchange rate means that New Zealanders can buy more with their Kiwi dollar than ever including petrol and including food. I do not know what the Labour Party has got against rising living standards for New Zealanders.Hon David Parker: Why is he steadfastly sticking to a monetary policy regime that was devised before the fall of the Berlin Wall when so many other countries have moved on and is driving the New Zealand dollar to heights that close down New Zealand businesses and jobs?Hon BILL ENGLISH: The Labour Party needs to make sure it is not led by the nose by the Greens—as it is on its electricity policies as we will find out on Thursday—on this matter of the exchange rate. The member is fooling himself if he believes that there is some easy way of a small open economy picking its exchange rate. You just cannot do it in a way that maintains a sensible economy without massive risk to taxpayers. The member has flown around the world talking to all sorts of experts but actually conventional monetary policy is the most appropriate for the New Zealand economy as it is and with growth between 2 to 3 percent we are in much better shape than a whole lot of other economies.