Hayes John: Questions for Oral Answer — Questions to Ministers 
Text is incorporated into the Bound Volume 
Hayes John: Questions for Oral Answer — Questions to Ministers 
[Sitting date: 25 September 2012. Volume:684;Page:5559. Text is incorporated into the Bound Volume.] 
2. 
JOHN HAYES (National—Wairarapa) 
 to the  
Minister of Finance 
: What measures has the Government taken to improve the long-term competitiveness of the New Zealand economy? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 The Government has taken a number of measures including reforming the tax system to reduce tax on work savings and companies and increase tax on consumption and property speculation improving regulations and reducing unnecessary costs on business and progressing our business growth measures that focus on exports innovation skills infrastructure capital markets and the use of natural resources. Last week I signed a new policy targets agreement that sets out specific targets for price stability helping to create a stable macroeconomic environment suitable for growth. 
John Hayes 
: What are the main features of the new policy targets agreement that will contribute to a more competitive economy? 
Hon BILL ENGLISH 
: The agreement continues to require the Reserve Bank to keep CPI inflation between 1 to 3 percent on average over the medium term. Within this target the new agreement now requires the bank to focus on keeping future average inflation near the 2 percent mid-point. In addition the policy targets agreement includes a stronger focus on financial stability by including asset prices in the range of indicators that the bank monitors. As with previous agreements it requires the Reserve Bank to seek to avoid unnecessary instability in output interest rates and the exchange rate. 
John Hayes 
: What lessons are there for New Zealand from international attempts to intervene in currency markets in the hope of creating more competitive economic conditions? 
Hon BILL ENGLISH 
: A Reserve Bank paper published earlier this year looks at interventions by the Bank of Japan and the Swiss National Bank and their relevance to New Zealand. It notes that economic conditions are quite different in New Zealand from Japan and Switzerland. Both of them have experienced deflation recently partly due to their strong currency appreciation. New Zealand has not. New Zealand has in fact experienced an increase in its terms of trade contributing to upwards pressure on the exchange rate. Switzerland and Japan have been forced to attempt to lower their currencies in order to ease monetary conditions. In New Zealand we could just lower interest rates if we want to ease monetary conditions. 
John Hayes 
: What specific lessons can New Zealand draw from the results of currency market interventions by Switzerland and Japan? 
Hon BILL ENGLISH 
: The Reserve Bank paper confirms that the currency market interventions are expensive and they do not have a lasting impact. It notes that currency interventions since 2008 have largely resulted in financial losses for the Swiss National Bank and the Bank of Japan and they have been ineffective in lowering their currencies. Since the beginning of 2008 despite the efforts of the Swiss bank to keep its currency down it has actually appreciated 27 percent against the euro and 15 percent against the US dollar. In Japan the yen has appreciated 29 percent against the US dollar and 37 percent against the euro. 
Hon David Parker 
: Which of the following measures is the best indicator of the competitiveness of the New Zealand economy: 53000 people a year leaving for Australia large job losses for exporters and local manufacturers competing against imports or an overvalued exchange rate leading to increases in New Zealand’s net international liabilities? 
Hon BILL ENGLISH 
: There are any number of ways of measuring competitiveness but in the long run it will be the profitability of our export sector which was damaged pretty severely in the first decade of this century. We are working hard to restore it. Unfortunately it is taking some time and there are some international headwinds such as for instance the large drop in coal prices recently that has hit Solid Energy.