Rejecting Federated Farmers’ calls for further public spending cuts to rein in the rising NZ dollar, Finance Minister Bill English said a considered approach must be taken to spending decisions. Services such as Working for Families and interest-free loans for students need to remain in place during the recession and state agencies are already subject to budgetary strictures. Sure, the NZ dollar is higher than the Govt would like, but – English insists – little can be done. Actually, we could peg the currency (as in Singapore and Hong Kong) or impress on speculators an official determination to lower the price of our currency by flooding the market with NZ dollars (printing more of them if necessary). The Govt won’t do it because it has opted to maintain a market framework.

Rebalancing Sorely Needed. Federated Farmers is unlikely to approve of market intervention anyway. But it does want the economy rebalanced in favour of exporters, and its economics spokesman, Philip York, complains this is being frustrated by excessive state spending. Huge budget deficits call for a rate of borrowing (more than $1bn a month) which drives up the dollar. Govt spending therefore must be lopped to help monetary policy and ensure the official cash rate is not made irrelevant. Other exporters are feeling the pinch too. Not only is the currency appreciating, but capital for investment is drying up. Commentator Bernard Hickey says it’s all very well having markets to export to, but NZ’s real problem is being able to produce competitively. He asks what is being done to rebalance the economy away from investing in property towards investing in exporting (not much, he ventures) and to reduce pressure on the currency.

Farmers Subsidised? York, who says we can’t keep borrowing to pay for welfare, suggests 10% cuts to all departmental budgets. He is unlikely to regard farmers as welfare beneficiaries, but the delay of the farm sector’s entry to the emissions trading scheme to 2015 will shift big costs from them to taxpayers. And the farmer-owned Ravensdown fertiliser company is working with Solid Energy on plans for a lignite-to-urea fertiliser plant. The Sustainability Council reckons it will qualify for millions of dollars a year in taxpayer-subsidies of its carbon debt under the ETS. Federated Farmers president Don Nicolson is not discomforted. Other farmers around the world get bigger subsidies, and “if everybody else is doing it, why shouldn’t we?” Some Govt spending obviously needs endorsing.

 Copyright © Trans Tasman Media Ltd