Financial markets here and overseas are showing a lot of
curiosity about what Labour Party finance spokesman David
Parker will say in his speech this morning.
Mr Parker is expected to outline how a Labour-led government
will lower the value of the New Zealand dollar, along with
his ideas for revamping New Zealand's monetary policy
BNZ senior economist Craig Ebert said one could argue about
whether the Labour party would gain power at the September 20
However, it was important to note Opposition thinking
regarding monetary policy, given the tendency for
democratically-elected governments to get booted out after a
long enough time at the helm.
Although not sure what Mr Parker's speech would contain, Mr
Ebert said he had gleaned some information from public
remarks made by the MP in recent times.
If the Reserve Bank was instructed to adopt a dual mandate,
the secondary objective would probably not be employment, as
in the United States.
It could be something aimed at reducing the current account
deficit, raising the national savings rate and taking
pressure off the New Zealand dollar, Mr Ebert said.
''Related to this, it looks as though Labour will give the
Reserve Bank more tools to do its augmented job. This could
well mean Labour will endorse more prudential-type tools as a
means of trying to improve the country's savings ratio.
''Parker has already expressed a dislike of the
loans-to-value policy recently introduced by the Reserve
The Labour-proposed monetary framework might also encourage,
more directly, the Reserve Bank to intervene in the dollar,
The central bank governor could well be maintained as the
single decision maker, rather than moving to a board
Provided Labour left the governor as the single decision
maker, retained consumer price index (CPI) inflation as the
primary target of policy and maintained the Reserve Bank's
independence, proposed changes might end up as being more
about politicking than truly having an impact on outcomes, Mr
''Then again, we'll also need to be sure the operational
details of any policy change will not lead to more problems
than they are designed to solve. We'll be interested to see
what he announces and his reasoning behind it.''