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12
JUL 10

Maybe there is another way....




Well sure enough the winners of high exchange rate high interest rate policies are out on the stump, like this one:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10656962

There is more to fixing the problem than monetary policy - there is but monetary policy needs fixing as well, see when all you have is a hammer most issues look like nails:

http://www.johnwalley.co.nz/113-when_all_you_have_is_hammer_al.aspx

And for other support:

http://www.johnwalley.co.nz/106-boe_starting_to_control_money_.aspx

Even the IMF:

http://www.johnwalley.co.nz/71-imf_says_more_to_growth_than_i.aspx

And Bryan Gould hits the nail right on the head today:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10658094

Best bits -

Only if exporters are competitive in price terms can they grow market share and boost profits through healthy margins. Otherwise, they must choose between maintaining prices and losing market share, or dropping prices and taking lower margins.


That is what seems to be happening to New Zealand exporters. They get to the export starting line, but something then stops them from running a successful race.


Their failure to kick on means that they do not derive the expected advantage from faster growth, better returns and higher productivity. The virtuous circle eludes them.


We do not need to look far to identify the culprit. We have run, and have done for many years, a policy of perennially high interest rates and consequently over-valued exchange rates that has meant that our exporters are always fighting a head wind.


They struggle to the starting line but are then weighed down, in price competition terms, by a dollar rate that cuts their margins and shrinks their markets.


Our narrowly focused macro policy may, in other words, be more than an obstacle to individual exporters, but the major factor in our productivity disappointments.


The key to our economic salvation may be a willingness to think again. Mystery solved?


I reiterate - "the key to our economic salvation may be a willingness to think again" - not much of that from our generic business lobby. 

 


tags: monetary policy, bryan gould, imf, bank of england, productivity
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