English Says N.Z. Won’t Enter Currency War Zone With Peashooter
New Zealand’s government isn’t prepared to sell the nation’s currency to relieve pressure on exporters and manufacturers, Finance Minister Bill English said.
“We’re not willing to take the kind of huge risks involved in large scale speculation in the exchange rate with taxpayer dollars,” English told reporters in Wellington today. “To influence the exchange rate you need a couple of hundred billion U.S. in the bank so they take you seriously. We’d be out in the war zone with a peashooter.”
Central bank Governor Graeme Wheeler last month said the currency was overvalued and was undermining profitability for exporters and those who compete with cheaper imports. New Zealand’s economy grew 2 percent in the year through September as manufacturing fell, while employment shrank for a third straight quarter in the three months through December.
The currency has gained 1.5 percent this year after rising 6.6 percent in 2012. It bought 84.10 U.S. cents at 11:45 a.m. in Wellington.
At current levels the exchange rate “does represent a fundamental strength of New Zealand’s economy relative to the U.S.,” English said. “We have been a stronger economy than the U.S. and that has been a good thing.”
The government’s political opponents have called for adjustments to central bank policy and adoption of so-called quantitative easing to relieve pressure on the currency, citing developments in major global economies.
“We accept the exchange rate at current levels is putting pressure on exporters,” English said. “The exchange rate is largely driven by external factors we can’t influence such as the choices they are making in Europe, the U.S. and U.K. We’re not in those desperate circumstances.”
The government says its efforts to make the economy more competitive will mean companies are better able to make profits when the currency is high.
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