Economist calls for dollar intervention

JON MORGAN
Last updated 05:00 25/05/2013

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Economist Ganesh Nana wants the Reserve Bank to intervene in foreign exchange markets for as long as it takes to bring the kiwi dollar down.

The Berl economist told deer farmers in Wellington the bank should become a daily trader till the exchange rate fell to "something sensible for our export sector".

The dollar has traded close to US86c recently, falling to almost US80c this week, before rebounding to about US80.9c yesterday.

"Sooner or later the speculators - Japanese housewives and Belgian dentists - will find somewhere else to play."

The reason why they played in New Zealand was because they knew it was an easy win.

Asked if New Zealand had the resources to do this, Nana replied, "It's called a printing press. I'm not kidding," he said to laughter.

"You can afford it. The Government has the legal right to print as much dollars as it likes."

It would be different from propping up an exchange rate, which ran the risk of bad losses.

"Seriously, it is paper. I can't understand why people get worried about this."

Other economists had claimed the US and Japan would retaliate, but they were not worried about New Zealand.

Petrol prices would rise, but export income would go up.

It would be a transfer of wealth, from the people who consume imports, "the baddies", to the people who earn exports, "the goodies".

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- BusinessDay.co.nz

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