Labour leader Phil Goff has announced that the party is abandoning the bi-partisan consensus on monetary policy, and would remove inflation-based targets and thus the independence of the Reserve Bank if elected. Labour obviously doesn’t feel it pumped up inflation enough last time they were in office with their fiscal imprudence. Matt Nolan gives more of an insight here, looking at Cunliffe’s badly-put argument for abandoning price stability. Basically the argument is that a focus on inflation means we ignore exchange rates and employment, which is nonsense.
What intrigues FCK the most about this withdrawal from reality is the view that price stability is not important to working New Zealanders, and the current system only favours the rich. No Right Turn says:
people like John Key don’t see the value of their assets eroded by inflation. But its very, very bad for everyone else, with interest-rate driven spikes in unemployment and mortgage pain, and crashes in export earnings due to the resulting shifts in the exchange rate.
Always half-right, Idiot/Savant ignores the fact working New Zealanders also have assets to erode in value (KiwiSaver anyone?) and will be the first to be hit by rising prices for groceries and other consumer items, driven by higher rates of inflation, due to having lower disposable incomes.
Moreover, it’s businessmen like Olly Newland, Bob Jones and Alan Gibbs who benefit the most from higher levels of inflation. All of them made a killing in property development during the 80s because high levels of inflation gave them a higher return on capital from buying and selling property, much higher than they could expect with lower levels of inflation. Certainly, when the Reserve Bank Act 1989 was implemented it led to higher levels of unemployment, and has from time to time spiked and hurt homeowners. But higher unemployment largely subsided during the mid-1990s, and apart from a downturn during the 1998 Asian crisis has been improving ever since. Even today unemployment rates are only roughly equal to those seen in 2001, not 1991.
Back to Gotcha
Ah, Phil, the closet Muldoonist.
JC
“it’s businessmen like Olly Newland, Bob Jones and Alan Gibbs who benefit the most from higher levels of inflation. Of of them made a killing in property development”
No they didnt. They made it in property investment. Which is different from development. Never mind, the MSM get it wrong all the time too. Possibly because they pay their staff so little that none of them can afford to buy property, so simply dont know!
Jones has done especially well with all the rent rises in Welly for all those extra thousands of public servants which need offices. Thanks Labour , he must say every christmas. Or morning.
Pedant moment back at ya.
On topic, Goff just has no ideas eh. I’m starting to take the contrary view that we should be aiming for a high NZ dollar. Why do our farmers have a “discount” price mentality? I wonder if the ever increasing number of “middle class” in Asia is going to provide a vast new market to compete for quality food and therefore provide an opportunity for increasing prices.